F-1 1 dp14632_f1.htm FORM F-1

As filed with the Securities and Exchange Commission on September 3, 2009

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form F-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Banco Santander (Brasil) S.A.

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s name into English)

Federative Republic of Brazil	6029	Not Applicable
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

Rua Amador Bueno, 474

São Paulo, SP 04752-005

Federative Republic of Brazil

(55 11) 3174-8589

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Banco Santander, S.A.

New York Branch

45 E. 53rd Street

New York, New York 10022

Attn: James H. Bathon, Chief Legal Officer

(212) 350-3500

(Name, address, including zip code, and telephone number, including area code, of agent for service)

With copies to:

Nicholas A. Kronfeld

Manuel Garciadiaz

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, N.Y. 10017

Phone: (212) 450-4000

Fax: (212) 450-4800

Andrew B. Jánszky

Shearman & Sterling LLP

Avenida Brigadeiro Faria Lima, 3400

04538-132 São Paulo – SP Brazil

Phone: (55 11) 3702-2202

Fax: (55 11) 3702-2224

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, please check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

CALCULATION OF REGISTRATION FEE
Title Of Each Class Of Securities To Be Registered	Proposed Maximum Aggregate Offering Price(2)(3)	Amount Of Registration Fee
Units(1)	$200,000,000	$11,160
Common shares, without par value
Preferred shares, without par value

(1) Each unit represents initially 47.83 subscription receipts of common shares, 7.17 common shares, 43.48 subscription receipts of preferred shares, and 6.52 preferred shares and, after conversion of the subscription receipts, 55 common shares, without par value, and 50 preferred shares, without par value. A separate Registration Statement on Form F-6 (File No. 333- ) was filed on and declared effective thereafter. The Registration Statement on Form F-6 relates to the registration of American depositary shares, or “ADSs”, evidenced by the American depositary receipts issuable upon deposit of the units registered hereby. Each ADS represents one unit.

(2) Includes units to be offered outside the United States and units subject to the over-allotment option granted to the underwriters but which may be resold in the United States in transactions requiring registration under the Securities Act of 1933. A portion of the units will be represented by ADSs.

(3) Estimated solely for purposes of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state or jurisdiction where the offer or sale is not permitted.

Subject to Completion

Preliminary Prospectus dated September 3, 2009

PROSPECTUS

Units

Banco Santander (Brasil) S.A.

(incorporated in the Federative Republic of Brazil)

including units in the form of American depositary shares

We are offering a total of units, each of which represents 55 common shares, without par value, and 50 preferred shares, without par value, of Banco Santander (Brasil) S.A. Until the approval of our capital increase by the Central Bank of Brazil, which is expected to occur promptly after the closing of this offering, the units will represent a combination of common and preferred shares and subscription receipts for common and preferred shares. See “The Offering”. We are offering the units in a global offering, which consists of an international offering in the United States and other countries outside of Brazil and a concurrent offering of units in Brazil. In the international offering, units are being offered directly or in the form of American depositary shares, or “ADSs”, each of which represents one unit. The offering of the ADSs is being underwritten by the international underwriters named in this prospectus. The units purchased by investors outside Brazil will be settled in Brazil and paid for in reais, and underwritten by the Brazilian underwriters named elsewhere in this prospectus. The Brazilian offering is being underwritten by the Brazilian underwriters. The closings of the international and Brazilian offerings are conditioned upon each other.

Prior to this offering, no public market existed for the units and ADSs. The initial public offering price of the ADSs is expected to be between U.S.$ and U.S.$ per ADS and between R$ and R$ per unit. After pricing of this offering, we expect that the ADSs will trade on the New York Stock Exchange under the symbol “ ” and the units will trade on the BM&FBOVESPA S.A. — Bolsa de Valores, Mercadorias e Futuros, or BM&FBOVESPA, under the symbol “SANB11”.

This global offering will be registered with the Brazilian Securities Commission (Comissão de Valores Mobiliários), or “CVM”. Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Investing in the units and ADSs involves risks. See “Risk Factors” beginning on page 23 of this prospectus.

	Per ADS	Total
Public offering price	U.S.$	U.S.$
Underwriting discounts and commissions	U.S.$	U.S.$
Proceeds, before expenses, to us	U.S.$	U.S.$

The international underwriters may also purchase up to an additional ADSs from us within 30 days from the date of commencement of trading of the units on the BM&FBOVESPA, to cover over-allotments, if any, in connection with the international offering. The Brazilian underwriters may also purchase up to an additional units from us within 30 days from the date of commencement of trading of the units on the BM&FBOVESPA, to cover over-allotments, if any, in connection with the Brazilian offering.

The units and ADSs will be ready for delivery on or about , 2009.

Global Coordinators and Joint Bookrunners
Santander Investment			Credit Suisse
Joint Bookrunners
BofA Merrill Lynch			UBS Investment Bank

The date of this prospectus is , 2009.

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Page

Presentation of Financial and Other Information	ii
Summary	1
Risk Factors	23
Forward-Looking Statements	33
Use of Proceeds	34
Market Information	35
Capitalization	39
Dilution	40
Exchange Rates	41
Selected Financial and Operating Data	42
Unaudited Pro Forma Consolidated Financial Information	51
Selected Statistical Information	57
Operating and Financial Review and Prospects	77
Industry	133
Business	140
Regulatory Overview	172
Management	198
Principal Shareholders	217
Related Party Transactions	219
Description of Capital Stock	222
Description of American Depositary Shares	235
Dividends and Dividend Policy	244
Taxation	248
Underwriting	256
Expenses of the Offerings	267
Legal Matters	268
Experts	268
Service of Process and Enforcement of Judgments	269
Where You Can Find More Information	270
Index to Financial Statements

In this prospectus, the terms “Santander Brasil”, the “Santander Brasil Group”, the “Bank”, “we”, “us”, “our” and “our company” mean Banco Santander (Brasil) S.A. and its consolidated subsidiaries (including, as from August 30, 2008, the entities of Banco Real), unless otherwise indicated. References to “Banco Real” mean Banco ABN AMRO Real S.A. and ABN AMRO Brasil Dois Participações S.A. and their respective consolidated subsidiaries, unless otherwise indicated. References to “Banespa” mean Banco do Estado de São Paulo S.A. – Banespa, one of our predecessor entities. The terms “Santander Spain” and “our parent” mean Banco Santander, S.A. References to “Santander Group” or “Grupo Santander” mean the worldwide operations of the Santander Spain conglomerate, as indirectly controlled by Santander Spain and its consolidated subsidiaries, including Santander Brasil.

You should rely only on the information contained in this prospectus. We and the international underwriters have not authorized any other person to provide you with different or additional information. If anyone provides you with different or additional information, you should not rely on it. Neither Santander Brasil nor the international underwriters are making an offer to sell the units or ADSs in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or any sale of the units or ADSs. Our business, financial condition, results of operations and prospects may have changed since the date on the front cover of this prospectus.

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This prospectus is being used in connection with the offering of units, including units in the form of ADSs, in the United States and other countries outside Brazil.

This offering of units and ADSs is being made in the United States and elsewhere outside Brazil solely on the basis of the information contained in this prospectus. We are also offering units in Brazil using a Portuguese-language prospectus. The Brazilian prospectus, which has been filed with the CVM, is in a format different from that of this prospectus and contains information not generally included in documents such as this prospectus.

No offer or sale of ADSs may be made to the public in Brazil except in circumstances that do not constitute a public offer or distribution under Brazilian laws and regulations.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

All references herein to the “real”, “reais” or “R$” are to the Brazilian real, the official currency of Brazil. All references to “U.S. dollars”, “dollars” or “U.S.$” are to United States dollars. All references to the “euro”, “euros” or “€” are to the common legal currency of the member states participating in the European Economic and Monetary Union. See “Exchange Rates” for information regarding exchange rates for the Brazilian currency since 2004.

Solely for the convenience of the reader, we have translated certain amounts included in “Summary Financial and Operating Data”, “Dilution”, “Capitalization”, “Selected Financial and Operating Data” and elsewhere in this prospectus from reais into U.S. dollars using the exchange rate as reported by the Central Bank of Brazil, or “Central Bank”, as of June 30, 2009 of R$1.9516 to U.S.$1.00 or the indicated dates (subject to rounding adjustments). These translations should not be considered representations that any such amounts have been, could have been or could be converted into U.S. dollars at that or at any other exchange rate as of that or any other date. In addition, translations should not be construed as representations that the real amounts represent or have been or could be converted into U.S. dollars as of that or any other date.

Certain figures included in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

Financial Statements

We maintain our books and records in reais. Our consolidated financial statements at and for each of the years ended December 31, 2008 and 2007 have been audited, as stated in the report appearing herein, and are included in this prospectus. Our unaudited consolidated interim financial statements at June 30, 2009 and for the six months ended June 30, 2009 and 2008 are also included in this prospectus. These financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, or “IFRS”. In addition, our consolidated financial statements include the results of Banco Real as from August 30, 2008. Balance sheet figures as of June 30, 2008 appearing in this document were derived from our unaudited consolidated interim balance sheet as of June 30, 2008.

On August 29, 2008, the Santander Group made a capital contribution to us of its shares of Banco Real and the minority shareholders of Banco Real exchanged their shares of Banco Real for shares of Santander Brasil (incorporação de ações). As a result, Banco Real became our wholly-owned subsidiary. As a consequence of this share exchange transaction, one of the key factors to be considered when analyzing our financial condition and results of operations at and for the years ended December 31, 2008 and 2007 is the consolidation of the entities of Banco Real in our financial statements since August 30, 2008. The impact of the consolidation of Banco Real in the last four months of 2008 is so substantial that it makes our results of operations for 2008 not comparable to those of 2007. In order to analyze the organic developments in our business obscured by the effect of the Banco Real

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acquisition, management uses and we present in this prospectus certain 2008 financial information excluding the results of Banco Real. Banco Real was our wholly-owned subsidiary during the last four months of 2008 and this presentation is intended only to subtract from our reported results for 2008 the amounts contributed by Banco Real. This information does not purport to represent what our results of operations would have been had we not acquired Banco Real. We have not adjusted our reported results for any expenses incurred in 2008 in connection with the acquisition of Banco Real or for any revenue synergies. Management believes that any such additional expense or revenue was not material.

The combined financial statements of Banco Real at and for the year ended December 31, 2007 and the income statement for period from January 1 to August 29, 2008 have been audited, as stated in the report appearing herein, and are included in this prospectus. The unaudited combined interim financial statements of Banco Real for the for the period from January 1 to August 29, 2007 are included in this prospectus for comparative purposes. These financial statements are prepared in accordance with IFRS.

We have included in this prospectus selected financial data for the Bank which have been derived from unaudited financial statements at and for the years ended December 31, 2006, 2005 and 2004 prepared in accordance with accounting practices derived from the Brazilian Corporate Law and standards of the Brazilian Monetary Council and the Central Bank or “Brazilian GAAP”. The Bank was formed as a result of the reorganization of the Brazilian banking interests of the Santander Group in 2006. Prior to August 31, 2006, the Santander Group held controlling interests, directly and indirectly, in four separate entities through which it conducted its banking operations in Brazil: Banco Santander Brasil S.A., Banco Santander Meridional S.A., Banco Santander S.A. and Banco do Estado de São Paulo S.A. — Banespa. On August 4, 2006, this group of banks was reorganized into a consolidated group under the Bank. The selected financial data included in this prospectus for the years ended December 31, 2006, 2005 and 2004 reflect the combined unaudited income statement data of the Bank, Banco Santander Brasil S.A., Banco Santander S.A. and Banco do Estado de São Paulo S.A. — Banespa for the years ended December 31, 2006, 2005 and 2004 and the combined unaudited balance sheet data of these banks at December 31, 2004 and 2005. Selected financial data at December 31, 2006 reflect consolidated audited financial data because these banks were reporting on a consolidated basis at that date.

IFRS differs in certain significant respects from U.S. GAAP. IFRS also differs in certain significant respects from Brazilian GAAP. Note 17 to our financial statements at June 30, 2009 and for the six months ended June 30, 2009 and note 45 to each of our 2008 financial statements and the financial statements of Banco Real, respectively, included herein, contain information relating to certain differences between IFRS and Brazilian GAAP. Unless otherwise indicated, all financial information of our company included in this prospectus is derived from our consolidated financial statements and Banco Real’s combined financial statements prepared in accordance with IFRS.

We prepare and will continue to prepare statutory financial statements in accordance with Brazilian GAAP.

See “Unaudited Pro Forma Consolidated Financial Information” for financial information reflecting our consolidated financial information, to give effect to our incorporation of Banco Real as if the acquisition of Banco Real by the Santander Group, its capital contribution of Banco Real to us and the share exchange transaction with minority shareholders (incorporação de ações) had occurred as of January 1, 2008.

Market Share and Other Information

We obtained the market and competitive position data, including market forecasts, used throughout this prospectus from internal surveys, market research, publicly available information and industry publications. We have made these statements on the basis of information from third-party sources that we believe are reliable, such as the Brazilian association of credit card companies (Associação Brasileira de Empresas de Cartões de Crédito e Serviços), or “ABECS”; the Brazilian association of leasing companies (Associação Brasileira de Empresas de Leasing), or “ABEL”; the Brazilian association of savings and mortgage financing entities (Associação Brasileira de Crédito Imobiliário e Poupança), or “ABECIP”; the Brazilian bank federation (FEBRABAN – Federação Brasileira de Bancos) or “FEBRABAN”; the Brazilian development bank (Banco Nacional de Desenvolvimento Econômico e Social), or “BNDES”; the Brazilian Institute of Geography and Statistics, or the “IBGE”; the Central Bank; the Central Bank system (Sistema do Banco Central), or “SISBACEN”, a Central Bank database; the Getulio Vargas Foundation (FGV – Fundação Getúlio Vargas), or “FGV”; the insurance sector regulator (Superintendência de

iii

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Seguros Privados), or “SUSEP”; the national association of investment banks (Associação Nacional dos Bancos de Investimento), or “ANBID”; and the national federation of private retirement and life insurance (Federação Nacional de Previdência Privada e Vida), or “FENAPREVI”, among others. Industry and government publications, including those referenced here, generally state that the information presented therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Although we have no reason to believe that any of this information or these reports are inaccurate in any material respect, we have not independently verified the competitive position, market share, market size, market growth or other data provided by third parties or by industry or other publications. We and the international or Brazilian underwriters do not make any representation as to the accuracy of such information.

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SUMMARY

This summary highlights selected information about us and the units and ADSs that we are offering. It may not contain all of the information that may be important to you. Before investing in the units and ADSs, you should read this entire prospectus carefully for a more complete understanding of our business and this offering, including our audited consolidated financial statements and the related notes, and the sections entitled “Risk Factors” and “Operating and Financial Review and Prospects” included elsewhere in this prospectus.

Overview

We are a leading full-service bank in Brazil, which we believe to be one of the most attractive markets in the world given its growth potential and low penetration rate of banking products and services. We are the third largest non government-owned bank, the largest bank controlled by a major global financial group and the fourth largest bank overall in Brazil with a 10.2% market share in terms of assets, at March 31, 2009. Our operations are located across the country and strategically concentrated in the South and Southeast, an area that accounted for approximately 75% of Brazil’s GDP in 2008, and where we have one of the largest branch networks of any Brazilian bank. For the six months ended June 30, 2009, we generated profit before taxes of R$3.8 billion, and at that date we had total assets of R$288.9 billion and shareholder’s equity of R$51.1 billion. Our Basel capital adequacy ratio (excluding goodwill) was 17.0%.

In August 2008, we acquired Banco Real which at the time was the fourth largest non government-owned Brazilian bank as measured by assets. At the time of the acquisition, we were the fifth largest non government-owned bank in Brazil as measured by assets. As a result of the acquisition of Banco Real and our organic growth, our net credit portfolio increased from R$44.6 billion at June 30, 2008 to R$132.3 billion at December 31, 2008, and our total deposits increased from R$46.9 billion at June 30, 2008 to R$124.0 billion at December 31, 2008, in each case as reported in our Brazilian GAAP financial statements. In the same period, our active current account holder base increased from 3.5 million to more than 8 million and our distribution network of branches and on-site service units increased from 1,546 to 3,603.

Banco Real’s operations are highly complementary to our pre-acquisition operations. We believe that the acquisition offers significant opportunities for the creation of operating, commercial and technological synergies by preserving the best practices of each bank. Banco Real’s strong presence in the states of Rio de Janeiro and Minas Gerais has further strengthened our position in the South and Southeast, complementing our strong footprint in the region, particularly in the state of São Paulo. The acquisition of Banco Real has further consolidated our position as a full-service bank with nationwide coverage and scale to compete effectively in our target markets.

Since the mid-1990s, Brazil has benefited from political, social and macroeconomic stability coupled with improvements in real income and a resulting high rate of upward social and economic mobility. During this period, the Brazilian financial services industry has experienced substantial growth, as economic stability, increased employment rates and rising purchasing power of the Brazilian population have been contributing to an increase in penetration of financial products and services. Nonetheless, the Brazilian financial market still presents a low credit penetration as compared to that of other developed and emerging markets, offering further growth opportunities. According to a World Bank 2009 Report, the ratio of total credit to GDP was approximately 50% in Brazil in 2007. As of December 31, 2007, in the United States, the ratio of total credit to GDP was approximately 169% according to central bank statistics. The Brazilian housing credit market is still incipient, with total mortgage loans accounting for approximately 2% of the GDP in 2007, according to the Central Bank, while, for example, in the United States the figure was approximately 68% in the same period according to the World Bank. We expect that credit penetration will continue to increase as a result of a relatively stable macroeconomic environment and customer-tailored new product offerings. In addition, we expect housing financing to grow given favorable trends, including a housing deficit, government’s focus on stimulating growth in the construction sector and legal reforms supporting the development of mortgage products. The Brazilian financial market is concentrated, with the four largest banks accounting for approximately 58% of total loans and 64% of savings deposits at March 31, 2009, according to the Central Bank.

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We are a member of the Santander Group, one of the largest financial groups in the world as measured by market capitalization. At June 30, 2009, the Santander Group had stockholders’ equity of €66.8 billion and total assets of €1,148 billion and was present in more than 40 countries, serving over 90 million customers through more than 14,000 branches. In the six months ended June 30, 2009, our operations accounted for over 20% of Santander Group’s net income and 53% of its net income in Latin America. At June 30, 2009, our business represented approximately 9% of the Santander Group’s assets and 51% of its assets in Latin America.

The following table shows certain financial and operational data for our operations.

	At and for the six months ended June 30,						At and for the year ended December 31,
	2009			2008			2008			2007
Financial Data	(in R$ million, except as otherwise indicated)
Assets		288,878			114,585			294,190			108,319
Total loans and advances to customers, gross		139,962			47,953			142,649			51,453
Total deposits		177,948			76,322			182,312			74,055
Shareholders’ equity		51,136			10,164			49,318			8,671
Net interest income		10,661			3,332			11,438			6,195
Fee and commissions income		3,463			1,881			4,809			3,364
Total income		15,483			5,573			15,971			11,367
Profit for the period		2,445			707			2,379			1,903
Return on average shareholders’ equity(1)		9.9	%		14.8	%		10.3	%		18.1	%
Efficiency ratio(2)		34.7	%		40.8	%		45.0	%		39.2	%
Basel capital adequacy ratio (excluding goodwill)		17.0	%		13.5	%		14.7	%		14.2	%

Operational Data
Number of customers (in thousands)	21,639			20,143				20,858			8,174
Number of ATMs (in units)		18,203			7,558			18,115			7,639
Number of branches (in units)		2,091			891			2,083			904
Market share (based on assets)(3)		10.2	%		4.4	%		10.5	%		4.5	%
Market share (based on deposits)(3)		10.7	%		5.1	%		9.8	%		4.2	%
Market share (based on loan portfolio)(3)		12.2	%		5.0	%		10.5	%		4.5	%

(1)	Six month returns are presented on an annualized basis by doubling the earnings component. Annualized returns are not necessarily indicative of returns for the entire year, which may be materially different from the annualized returns.

(2)	Efficiency ratio is defined as administrative expenses divided by total income. The ratio for the six months ended June 30, 2008 is presented on a pro forma basis. See “Unaudited Pro Forma Consolidated Financial Information” .

(3)	Source: Central Bank.

Our Businesses

Our business consists of three operating segments: Commercial Banking, Global Wholesale Banking and Asset Management and Insurance. The following table shows selected financial data for our operating segments.

	For the six months ended June 30, 2009				For the year ended December 31, 2008
	Net interest income		% of total		Net interest income		% of total
	(in millions of R$, except as otherwise indicated)
Commercial Banking		9,750.8		91.5		10,191.7		89.1
Global Wholesale Banking		893.7		8.4		1,213.5		10.6
Asset Management and Insurance(1)		16.5		0.1		32.8		0.3
Total		10,661.0		100.0		11,438.0		100.0

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(1)

Does not include results of operations of the asset management and insurance companies acquired through a series of share exchange transactions (incorporações de ações) on August 14, 2009. See “—Recent Events”. Our asset management and insurance business represented 1.5% or R$227 million of our total income as of June 30, 2009.

Commercial Banking: We focus on customer relationships, extending credit, services and products to individuals and corporations (other than global corporate customers who are served by our Global Wholesale Banking segment) through personal loans (including home and automobile financing, unsecured consumer financing, checking account overdraft loans, credit cards and payroll loans), leasing, commercial loans, working capital lines and foreign trade financing. Our product offering extends to private retirement plans, insurance, bill collection and processing services. Our Commercial Banking operations also include private banking typically for individuals with investment assets of over R$1 million. Our business model is based on a tailored approach to each income class of our individual customers (high, mid and low income classes) in order to address their specific needs. We are particularly well positioned in the mid-income class (monthly income in excess of R$1,200 and below R$4,000) and the high income class (monthly income in excess of R$4,000). Our customers are serviced throughout Brazil primarily through our branch network, which, at June 30, 2009, consisted of 2,091 branches, 1,521 on-site service units located at our corporate customers’ premises, and 18,203 ATMs, as well as our Internet banking platform and our call center operations. We believe our retail operations have benefited significantly from the acquisition of Banco Real, by improving our geographic coverage of Brazil and complementing our client portfolios. For example, Banco Real has historically had strong presence in the high-income class and small and medium-sized businesses, or SMEs, and in products such as automobile financing, while our strengths have been historically in the mid-income class and civil servant sectors, and in insurance products.

Global Wholesale Banking: We are a leading wholesale bank in Brazil and offer financial services and sophisticated and structured solutions to our customers, in parallel with our proprietary trading activities. Our wholesale banking business focuses on servicing approximately 700 large local and multinational conglomerates, which we refer to as Global Banking & Markets, or “GB&M”, customers. In the six months ended June 30, 2009, Brazilian operations represented approximately 30% of the Santander Group’s wholesale banking business measured by profit before tax. Our wholesale business provides our customers with a wide range of domestic and international services that are specifically tailored to the needs of each client. We offer products and services in the following key areas: global transaction banking, credit markets, corporate finance, equities, rates, market making and proprietary trading. Our customers benefit from the global services provided by the Santander Group’s integrated wholesale banking network and local market expertise. Our proprietary trading desk is under strict risk control oversight and has consistently shown positive results, even under volatile scenarios.

Asset Management and Insurance: We are the fourth largest asset manager in Brazil by assets under management, with 437,258 customers, according to data published by ANBID in June 2009. At June 30, 2009, we had R$99.8 billion in assets under management. Our product offering includes fixed income, money market, equity and multi-market funds. As part of our insurance business, we offer primarily bancassurance products related to our core banking business, such as home, credit life insurance and capitalization and pension products, to our retail and SME customers. We recently acquired 50% of Real Seguros Vida e Previdência S.A. (formerly Real Tokio Marine Vida e Previdência S.A.). Following the acquisition, Santander Brasil became one of the largest insurance companies in terms of issued premiums as of June 30, 2009, ranking eleventh in premiums, fourth in personal accident insurance, sixth in life insurance and fourth in residential insurance in Brazil (when combining our historic business with the business of Real Seguros Vida e Previdência). We believe that our strong branch network and client base will allow us to further expand the bancassurance business in a coordinated manner to individuals and SMEs as well as large corporations. We focus on the sale of products issued by the Santander Brasil Group, which represented almost 80% of our insurance premiums in the six months ended June 30, 2009. On August 14, 2009, our shareholders elected to transfer certain Brazilian asset management and insurance companies that were previously owned by Santander Spain to Santander Brasil, through a series of share exchange transactions (incorporações de ações) in order to consolidate all of the Santander Group’s Brazilian insurance and asset management operations

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into Santander Brasil. These transactions are pending approval by the Central Bank and SUSEP (with respect to the insurance operations). See “—Recent Events”.

Our Competitive Strengths

We believe that our profitability and competitive advantages are the result of Santander Brasil’s five pillars: nationwide presence with leading position within the high income regions of the country; wide range of products tailored to meet client needs; conservative risk profile; scalable state-of-the-art technology platform; and focus on sustainable growth, both organically and through selective acquisitions.

Relationship with the Santander Group

We believe that being part of the Santander Group offers us a significant competitive advantage over the other banks in our peer group, none of which is part of a similar global banking group. This relationship allows us to:

·	leverage the Santander Group’s global information systems platform, reducing our technology development costs, providing operational synergies with the Santander Group and enhancing our ability to provide international products and services to our customers;

·	access the Santander Group’s multinational client base;

·	take advantage of the Santander Group’s global presence, in particular in other countries in Latin America, to offer international solutions for our Brazilian corporate customers’ financial needs as they expand their operations globally;

·	selectively replicate or adapt the Santander Group’s successful product offerings from other countries in Brazil;

benefit from the Santander Group’s operational expertise in areas such as internal controls and risk management, which practices have been developed in response to a wide range of market conditions across the world and which we believe will enhance our ability to grow our business within desired risk limits;

·	leverage the Santander Group’s experience with integrations to maximize and accelerate the generation of synergies from the Banco Real acquisition and any future acquisitions; and

·	benefit from the Santander Group’s management training and development which is composed of a combination of in-house training and development with access to managerial expertise in other Santander Group units outside Brazil.

Strong presence in attractive demographic and geographic areas

We are focused on the growing mid- and high-income classes in Brazil, which we define as individuals with monthly income in excess of R$1,200 and R$4,000, respectively. We are well positioned to benefit from the growth in our target customer base and the relatively low penetration of financial products and services in Brazil, through sales of key products such as credit cards and insurance. Mid- and high-income customers provide access to a stable and low cost funding base through customer time and demand deposits. Furthermore, we believe that our focus in these income classes has increased our profitability, as they have traditionally produced higher volumes and margins.

We believe that there is further potential through the use of our existing, scalable and newly redesigned IT platform for increasing the penetration of financial products and services with our current client base of approximately 99.1 million current account holders according to the Central Bank. For example, at June 30, 2009,

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only 20% of our current account holders had personal loans and only 60% had a credit card. In addition, the acquisition of Banco Real strengthened our competitive position in the South and Southeast regions of Brazil, an area that accounted for approximately 73.1% of Brazil’s GDP in 2008, and where we now have one of the largest branch networks among Brazilian banks. Our presence on these attractive geographic areas, combined with our focus on mid- and high-income customers allow us to effectively cover a significant portion of Brazil’s economic base.

Track record of successful integrations

The Santander Group has expanded its footprint worldwide through the successful integration of numerous acquired businesses. For example, Abbey National Bank in the United Kingdom improved its efficiency ratio (cost to income) from 70.0% in 2004, when it was acquired by the Santander Group, to 46.7% in 2008. In addition, since 1997, the Santander Group has acquired six banks in Brazil, demonstrating its ability to execute complex acquisitions in this market, integrate the acquired companies into its existing business and improve the acquired companies’ operating performance. Our first significant acquisition was of Banespa in November 2000. In our acquisitions, but particularly in the case of Banco Real, we join the best of both banks into a single institution, benchmarking business strategies, key personnel, technology and processes of both banks to ensure the optimal combination for a sustainable competitive position. That is the case with our integration of Banco Real, from which we are seeking to achieve cumulative cost synergies of approximately R$2.4 billion (calculated based on the costs of Santander Brasil and Banco Real for 2008 adjusted for inflation and estimated salary increases) and cumulative revenue synergies of approximately R$300 million by 2010.

We started the process of the operational, commercial and technological integration of Banco Real immediately following the share exchange (incorporação de ações) in August 2008. We developed a three-year integration plan, which we are carefully executing in an effort to achieve synergies and ensure that best practices will be identified and implemented. Our wholesale banking operations have been fully integrated since the end of 2008. In March 2009, we began the integration of the branch networks and electronic distribution channels of the two institutions to enable customers to perform not only cash withdrawals but a full range of transactions at branches or ATMs of either bank. We expect to have fully integrated ATM and branch networks in 2010. We believe that we have thus far achieved our key integration goals, including maintaining and improving customer service; identifying operational strengths of each bank and maintaining and leveraging these strengths; establishing a new business culture among our employees focused on our strengths; retaining and developing trained and talented employees; and achieving our operating targets.

Leading market position

We rank third among non government-owned banks in Brazil in terms of assets with a market share of 10.2% at March 31, 2009. Among these banks, we believe we hold a top three market position in most of our key product lines as evidenced by our market share in the following selected products and regions.

	At March 31, 2009
	Market share (%)
Overdraft		19.1
Payroll/individual loans		13.1
Auto leasing/CDC		15.3
Credit cards		9.7
Branches		12.2
Southeast		15.9
South		8.7

Source: Central Bank.

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The acquisition of Banco Real has further enhanced our critical mass in the Brazilian market. We believe that our scale and market leadership provide us with exceptional competitive opportunities including the ability to gather market intelligence to support decision-making in determining business opportunities and in meeting our customers’ needs operating as a full service bank. Since the acquisition of Banco Real, we have organically increased our market share in key business lines such as payroll/individual loans, overdraft on current accounts and credit cards. In addition, we are a leading wholesale bank in Brazil. Through our unique access to the Santander Group’s global network, we are able to support our large Brazilian corporate customers in the internationalization of their businesses, for example, through trade and acquisition financing, which brings together a loan syndicate that could use several take-out strategies in different markets. As one of the top tier banks in the country, and in light of the opportunities for leveraging our operating segments, our broad product offering and geographic presence, we are well positioned to gain market share.

State-of-the-art integrated technology platform

We operate the latest generation customer-centered technology platform that incorporates the standards and processes, as well as the proven innovations, of both the Santander Group worldwide and Banco Real. The incorporation of a customer relationship management system enables us to deliver products and services targeted to the needs of our customers. Because our IT platform is integrated with the platform of the Santander Group, we are able to support our customer’s global businesses and benefit from a flexible and scalable platform that will support our growth in the country. This platform has been enriched with a set of customer-focused features inherited from Banco Real, which we believe provides us with a significant competitive advantage.

Our Strategy

Our goal is to be the leading full-service bank in Brazil in terms of revenues, profitability and brand recognition, as well as client and work force satisfaction. We strive to be a relationship bank and the primary bank of our retail and wholesale customers based on sustainable practices, serving them with our full range of products. We believe we can achieve these goals through the following strategies:

Improve operating efficiency by benefiting from integration synergies and implementing best practices

We will continue seeking ways to further improve our operating efficiency and margins. We intend to maintain investment discipline and direct resources to areas that generate improvements in our client management and increase our revenues. We expect to be able to generate additional synergies from the combination of best practices of Santander Brasil and Banco Real, both in terms of revenues as we further leverage on relationship and cross selling opportunities across a wider client base, as well as in terms of costs as we realize the potential gains driven by scale, raising our efficiency levels. We believe that synergies creation will be supported by the complementary geographic distribution and customer base of the combined branch networks and the banks’ relatively low product overlap. Our integration has already shown a significant expense reduction, with our cost to income ratio declining from 45.0% in 2008 to 34.7% in the first half of 2009, and we believe that there are opportunities for further reductions in operating expenses.

Expand product offering and distribution channels in Commercial Banking

We intend to further increase our business and operations throughout Brazil, expanding our Commercial Banking services to existing and prospective retail customers. We plan to offer new products and services to existing customers based on each customer’s profile through our numerous distribution channels by leveraging our customer relationship management data base and IT platform. Our efforts related to the offer of new products and expansion of our reach to other markets will continue to be focused on the correct risk measurement of those opportunities. We also will seek to increase our market share through the offering of innovative banking products and intend to focus on product areas where we believe there is opportunity to increase our presence in the Brazilian market, for example in credit cards and insurance products. Furthermore, we plan to attract current account holders by capturing users of our products, such as automobile financing, insurance or credit cards. We will continue to focus our marketing

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efforts to enlarge our customer base and increase the number of products used by each client, as well as to increase our share in those products for which clients generally operate with more than one bank. We intend to improve our competitiveness by further strengthening our brand awareness, particularly through marketing.

We intend to improve and expand the distribution channels for our products through our traditional branch network and alternative marketing and direct sales distribution channels such as telemarketing, Internet banking and correspondent banks. We plan to open 600 new branches by 2013 in our stronghold area of South and Southeastern Brazil and other regions where we have critical mass. We will continue to maximize the synergies and leverage the opportunities between our corporate and retail businesses. For instance, when rendering payroll services to our corporate customers, we can place an on-site service unit at our corporate client’s premises and thereby access its employees as a potential new customer base and achieve the critical mass necessary to open a new branch in that area. We intend to grow our mortgage business as a consequence of the housing deficit in Brazil and the legal reforms supporting mortgage financing.

Capitalize on our strong market position in the wholesale business

We provide multinational corporations present in Brazil and local companies, including those with operations abroad, with a wide variety of financial products, utilizing our worldwide network to serve our customers’ needs with customized solutions. We intend to further focus on our strong worldwide position as a client relationship wholesale bank, in line with the Santander Group’s worldwide strategy for the Global Wholesale Banking segment. We expect to benefit from the Santander Group’s strengthened market position as a key player in the global banking industry and thereby strengthen our existing relationships and build new lasting relationships with new customers, exploring the widest possible range of our product portfolio, particularly higher margin products. In addition, as a leading local player with the support of a major international financial institution, we intend to be a strong supporter of Brazilian corporations as they continue to expand their businesses worldwide. Moreover, we believe that we can use our relationship with large corporate customers to access their suppliers as potential new customers. In addition, we intend to distribute treasury products to smaller companies or individuals through the Santander Global Connect (SGC) platform.

Further develop a transparent and sustainable business platform

We will maintain a commitment to economic, social and environmental sustainability in our procedures, products, policies and relationships. We will continue building durable and transparent relationships with our customers through understanding their needs and designing our products and services to meet those needs. We believe that our commitment to transparency and sustainability will help us create a business platform to maintain growth in our operations over the long term and that is instrumental to forge business relationships, improve brand recognition and attract talented professionals. We will continue to sponsor educational opportunities through Santander Universidades and the Universia portal to foster future potential customer relationships.

Continue growing our insurance business

We intend to continue growing our insurance business, particularly bancassurance. Our commitment to grow in this segment was recently demonstrated by our acquisition of the remaining 50% of Real Seguros Vida e Previdência S.A. (formerly Real Tokio Marine Vida e Previdência S.A.). We expect to increase our presence within the insurance segment by leveraging on our strong branch network and client base, particularly in the South and Southeast, to cross sell insurance products with the goal of maximizing the income generated by each customer, as well as using our strong relationships with SMEs and large corporations within the country. We intend to sell our products by means of our traditional distribution channels, such as branches, and also through ATMs, call center and Internet banking.

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Recent Events

On August 14, 2009, as a result of a capital contribution by our parent company and a series of share exchange transactions (incorporações de ações), 100% of the share capital of certain Brazilian asset management, insurance and banking companies, all of which were previously owned by Santander Spain and minority shareholders, were transferred to us. These transactions are pending approval by the Central Bank and SUSEP (with respect to the insurance operations). The purpose of these transactions was to consolidate Santander Spain’s investments in Brazil, to simplify the current Santander Group corporate structure and to consolidate Santander Spain’s and the minority shareholders’ interests in such entities in Santander Brasil. As a result of these transactions, our capital stock was increased by approximately R$2.5 billion through the issuance of 14,410,886,181 shares, comprised of 7,710,342,899 common shares and 6,700,543,282 preferred shares. Under IFRS, we accounted for the share exchange transactions as from the date such transactions were completed based on the historical carrying amounts of assets and liabilities of the companies transferred.

The following table sets forth the name of each transferred company, its principal business activities, net income for the year ended December 31, 2008 and shareholders’ equity as of December 31, 2008, each in accordance with Brazilian GAAP.

		At and for the year ended December 31, 2008
	Principal business activity	Net income		Shareholders’ equity
		(in millions of R$)
Santander Seguros S.A.	Commercialization of life insurance policies and pension funds		131		392
Santander Brasil Asset Management Distribuidora de Títulos e Valores Mobiliários S.A.	Asset management		41		80
Banco Comercial e de Investimento Sudameris S.A.	Multiple service banking		186		2,011

Risks Related to Our Business

Prospective investors should carefully consider the risks and other matters described under “Risk Factors”, including the following:

·	we are vulnerable to the current disruptions and volatility in the global financial markets as well as to government action intended to alleviate the effects of the recent financial crisis;

·	changes in regulation may negatively affect us;

·	developments and the perception of risk in other countries, especially in the United States and in emerging market countries, may adversely affect our access to financing and the market price of our securities;

·	our securities and derivative financial instruments are subject to market price and liquidity variations due to changes in economic conditions and may produce material losses;

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·	changes in base interest rates by the Central Bank could adversely affect our results of operations and profitability;

·	the increasingly competitive environment and recent consolidations in the Brazilian financial services market may adversely affect our business prospects;

·	we may experience increases in our level of past due loans as our loan portfolio matures;

·	our market, credit and operational risk management policies, procedures and methods may not be fully effective in mitigating our exposure to unidentified or unanticipated risks;

·	if our reserves for future insurance policyholder benefits and claims are inadequate, we may be required to increase our reserves, which would adversely affect our results of operations and financial condition;

·	we may fail to recognize the contemplated benefits of the acquisition of Banco Real;

·	the profitability of our insurance operations may decline if mortality rates, morbidity rates or persistency rates differ significantly from our pricing expectations; and

·	our controlling shareholder has a great deal of influence over our business.

One or more of these matters could negatively impact our business or financial performance and our ability to implement our business strategy successfully.

Our principal executive offices are located at Rua Amador Bueno, 474, São Paulo, SP 04752-005, Brazil, and our general telephone number is (55 11) 3174-8589. Our website is www.santander.com.br. Information contained on, or accessible through, our website is not incorporated by reference in, and shall not be considered part of, this prospectus.

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THE OFFERING

Issuer		Banco Santander (Brasil) S.A.

Global offering		The global offering consists of the international offering and the concurrent Brazilian offering.

International offering		We are offering units, including units in the form of ADSs, through the international underwriters (which, in the case of the units, will act as placement agents on behalf of the Brazilian underwriters) in the United States and other countries outside Brazil. The units purchased by any investor outside Brazil will be settled in Brazil and paid for in reais. Any investor outside Brazil purchasing units must comply with the requirements established by the National Monetary Council (Conselho Monetário Nacional), or “CMN” and the Brazilian Securities Commission (Comissão de Valores Mobiliários), or “CVM.”
Brazilian offering		Concurrently with the international offering, we are offering units through the Brazilian underwriters in Brazil to investors in Brazil.

Employee, director, officer and customer offering		We will reserve up to 20% of the units in the retail portion of the Brazilian offering for our employees, directors and officers and customers in Brazil at the public offering price for the Brazilian offering. See “Underwriting”.

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Units		Except as described under “—Subscription Receipts” below, each unit represents 55 common shares and 50 preferred shares. A holder of units will be entitled to the same dividend and voting rights as a holder of the underlying shares. For a description of the material terms of the units and of a unit holder’s material rights, see “Description of Capital Stock—Description of the Units.”

Assembling Units		After the ratification of our capital increase by the Central Bank and completion of this offering, we intend to create a structure to allow non-controlling shareholders that hold common or preferred shares but not amounts sufficient to allow them to assemble units (that is, lots of 55 common shares and 50 preferred shares in exchange for each unit), to acquire common and preferred shares at market price in order to complete units. This structure may be subject to regulatory approval and its terms and conditions would then be communicated to the non-controlling shareholders. We cannot be sure that we will be able to implement such a structure or that it will be approved by the CVM and BM&FBOVESPA. Our shareholder Santander Seguros, a member of the Santander Group, has indicated its intention to sell its own shares issued by us to our other non-controlling shareholders that intend to purchase common or preferred shares exclusively for purposes of acquiring the correct amount of shares to allow them to assemble units.

ADSs		Each ADS represents one unit. ADSs will be evidenced by American depositary receipts, or “ADRs”. The ADSs will be issued under a deposit agreement among us, as depositary, and the registered holders and beneficial owners from time to time of ADSs issued thereunder.

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Subscription receipts		In order to comply with Central Bank regulations and certain fungibility requirements of the BM&FBOVESPA, each unit will, until the approval of our capital increase by the Central Bank, represent fractional shares of our common shares and preferred shares and subscription receipts representing the right to receive additional common shares and preferred shares such that each unit will initially represent 47.83 subscription receipts of common shares, 7.17 common shares, 43.48 subscription receipts of preferred shares and 6.52 preferred shares. Upon approval by the Central Bank of our capital increase, which is expected to occur promptly after the closing of this offering, the subscription rights will be converted into common and preferred shares and each unit will represent 55 common shares and 50 preferred shares. If the Central Bank does not ratify our capital increase within six months from the closing date of this offering, Santander Insurance Holding, S.L., one of our shareholders, has agreed to deliver to each record holder of units as of the date of delivery, free of charge, a fraction of a preferred share and a fraction of a common share such that the aggregate numbers of common and preferred shares represented by all units held of record by that holder plus such fractions of shares make up whole numbers of preferred and common shares. For example, a record holder of two units (representing receipts plus 14.34 common shares and 13.04 preferred shares) would receive 0.66 common shares and 0.96 preferred shares. In addition, the capital increase corresponding to the subscription receipts would be cancelled and amounts in respect of such subscription receipts equal to the amounts paid for such receipts in this offering would be distributed to the then-current investors. See “Risk Factors—Risks Relating to Our Units and ADSs—Until the Central Bank ratifies our capital increase in connection with this offering, the units will represent subscription receipts, common and preferred shares and not only our common and preferred shares. We cannot provide assurance as to when or if the Central Bank will ratify our capital increase.” and “Description of Capital Stock—Description of the Subscription Receipts”.

Offering price		The public offering price for the international offering for the units and ADSs is set forth on the cover page of this prospectus.

Over-allotment options		We have granted the international underwriters the right to purchase up to an additional ADSs within 30 days from the date of commencement of trading of the units on the BM&FBOVESPA, to cover over-allotments, if any, in connection with the international offering. We have also granted the Brazilian underwriters the right to purchase up to an additional units within 30 days from the date of commencement of trading of the units on the BM&FBOVESPA, to cover over-allotments, if any, in connection with the Brazilian offering.

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Use of proceeds		We estimate that the net proceeds to us from the global offering (before deducting underwriting fees and transaction expenses) will be approximately U.S.$ . We intend to use the net proceeds from the global offering to expand our business in Brazil by growing our physical presence and increasing our capital base. We also intend to improve our funding structure and, along with our traditional funding sources, increase our current credit transactions. See “Use of Proceeds”.

Share capital before and after global offering		As of the date of this prospectus, our share capital consisted of 158,154,602,751 preferred shares and 181,989,171,114 common shares. We did not have any shares in treasury. Immediately after the global offering, we will have common shares and preferred shares outstanding, assuming no exercise of the underwriters’ over-allotment options. Following the offering, Santander Spain, our controlling shareholder, will continue to own, indirectly, approximately % of our common shares, % of our preferred shares and % of our total capital, assuming no exercise of the underwriters’ over-allotment options.

Voting rights		A holder of units will be entitled to the same voting rights as a holder of the underlying common and preferred shares. No voting rights attach to subscription receipts or to fractions of shares. Holders of our common shares are entitled to vote in our shareholders’ meetings. Holders of our preferred shares are not entitled to vote in our shareholders’ meetings, with limited exceptions. See “Description of Capital Stock—Rights of Common Shares and Preferred Shares”. Holders of ADSs are entitled to instruct the depositary how to vote underlying common shares, subject to the terms of the applicable deposit agreement. See “Description of American Depositary Shares—Voting of the Underlying Deposited Securities”.

Dividends		We intend to declare and pay dividends and/or interest attributed to shareholders’ equity, as required by the Brazilian corporate law and our by-laws. The amount of any distributions will

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		depend on many factors, such as our results of operations, financial condition, cash requirements, prospects and other factors deemed relevant by our board of directors and shareholders. Holders of the ADSs will be entitled to receive dividends to the same extent as the owners of our common and preferred shares, subject to the deduction of the fees of the depositary and the costs of foreign exchange conversion. See “Dividends and Dividend Policy” and “Description of Capital Stock”.

Listing		We expect to list the ADSs on the New York Stock Exchange, or NYSE, under the symbol “ ”. We expect to list the units on the BM&FBOVESPA under the symbol “SANB11”.

Lock-up agreements		We have agreed with the underwriters, subject to certain exceptions, not to offer, sell, or dispose of any shares of our share capital or securities convertible into or exchangeable or exercisable for any shares of our share capital during the 180-day period following the date of this prospectus. Our parent company, members of our board of directors and our executive officers have agreed to substantially similar lock-up provisions, subject to certain exceptions.
ADR Depositary
Risk factors		See “Risk Factors” and the other information included in this prospectus for a discussion of factors you should consider before deciding to invest in the units or ADSs.

Expected timetable for the global offering (subject to change):

Commencement of marketing of the global offering	, 2009
Pricing	, 2009
Commencement of trading of ADSs on NYSE	, 2009
Settlement and delivery of units and ADSs	, 2009

Unless otherwise indicated, all information contained in this prospectus assumes no exercise of the option granted to , to be exercised with the consent of , to purchase up to additional units in the form of ADSs to cover over-allotments of ADSs, if any, in connection with the international offering and the Brazilian underwriters’ option to purchase up to units to cover over-allotments, if any in connection with the Brazilian offering.

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SUMMARY FINANCIAL AND OPERATING DATA

Santander Brasil financial data at and for the years ended December 31, 2008 and 2007 have been derived from the audited consolidated financial statements prepared in accordance with IFRS included in this prospectus. Banco Real has been consolidated with our financial statements since August 30, 2008. The Banco Real financial data at and for the year ended December 31, 2007 and for the period from January 1 to August 29, 2008 have been derived from the audited combined financial statements prepared in accordance with IFRS for Banco Real included in this prospectus. Our results of operations for the year ended December 31, 2008 are not comparable to our results of operations for the year ended December 31, 2007 because of the consolidation of Banco Real in our financial statements as from August 30, 2008. See “Operating and Financial Review and Prospects—Acquisition of Banco Real”.

The summary consolidated financial data at June 30, 2009 and for the six months ended June 30, 2009 and 2008 for Santander Brasil have been derived from the unaudited consolidated interim financial information included elsewhere in this prospectus, which in the opinion of our management, includes all adjustments necessary to present fairly our results of operations and financial condition at the dates and for the periods presented. The results for the six months ended June 30, 2009 are not necessarily indicative of the results of operations that you should expect for the entire year ended December 31, 2009 or any other period.

The summary combined financial data for the period from January 1 to August 29, 2007 for Banco Real have been derived from the unaudited combined interim financial information included elsewhere in this prospectus, which in the opinion of our management, includes all adjustments necessary to present fairly our results of operations and financial condition at the dates and for the periods presented.

The pro forma summary financial data for Santander Brasil for the year ended December 31, 2008 and six months ended June 30, 2008 have been derived from the unaudited pro forma consolidated financial information included elsewhere in this prospectus, which gives effect to our incorporation of Banco Real as if the acquisition of Banco Real by the Santander Group, its capital contribution of Banco Real to us and the share exchange transaction with minority shareholders (incorporação de ações) had occurred as of January 1, 2008. See “Unaudited Pro Forma Consolidated Financial Information.”

This financial information should be read in conjunction with our audited and unaudited financial statements and the related notes and the sections entitled “Selected Financial and Operating Data” and “Operating and Financial Review and Prospects” included elsewhere in this prospectus.

Santander Brasil Income Statement Data

	Santander Brasil
	For the six months ended June 30,
	2009		2009		2008 (pro forma)(1)		2008
	(in millions of U.S.$, except as otherwise indicated)(2)		(in millions of R$, except as otherwise indicated)
Interest and similar income	10,131		19,771		17,405		6,715
Interest expense and similar charges	(4,668	)	(9,110	)	(7,978	)	(3,383	)
Net interest income	5,463		10,661		9,427		3,332
Income from equity instruments	8		15		18		16
Share of results of entities accounted for using the equity method	132		257		161		2
Fee and commission income	1,774		3,463		3,440		1,881
Fee and commission expense	(229	)	(447	)	(500	)	(164	)
Gains/losses on financial assets and liabilities (net)	1,401		2,734		1,459		686

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	Santander Brasil
	For the six months ended June 30,
	2009		2009		2008 (pro forma)(1)		2008
	(in millions of U.S.$, except as otherwise indicated)(2)		(in millions of R$, except as otherwise indicated)
Exchange differences (net)	(531	)	(1,037	)	(470	)	(145	)
Other operating income (expenses)	(84	)	(163	)	26		(35	)
Total income	7,934		15,483		13,561		5,573
Administrative expenses	(2,756	)	(5,380	)	(5,535	)	(2,234	)
Depreciation and amortization	(254	)	(495	)	(546	)	(310	)
Provisions (net)(3)	(1,004	)	(1,958	)	(934	)	(522	)
Impairment losses on financial assets (net) (4)	(2,475	)	(4,831	)	(3,194	)	(1,496	)
Impairment losses on other assets (net)	(35	)	(68	)	(15	)	(9	)
Gains/losses on disposal of assets not classified as non-current assets held for sale	586		1,145		38		32
Gains/losses on disposal of non-current assets held for sale	(29	)	(56	)	(14	)	(24	)
Profit before tax	1,967		3,840		3,361		1,010
Income tax	(714	)	(1,395	)	(1,191	)	(303	)
Consolidated profit for the period	1,253		2,445		2,170		707

Earnings per share
Basic and diluted earnings per 1,000 shares
Common shares (reais)			7.17		6.45		5.07
Preferred shares (reais)			7.89		7.09		5.58
Common shares (U.S. dollars)(2)			3.67		4.05		3.18
Preferred shares (U.S. dollars)(2)			4.04		4.45		3.51
Weighted average shares outstanding (in thousands) – basic and diluted
Common shares			174,292,416		172,041,961		71,315,968
Preferred shares			151,465,867		149,503,808		61,969,586

(1)	See “Unaudited Pro Forma Consolidated Financial Information” for more information.

(2)	Translated for convenience only using the selling rate as reported by the Central Bank at June 30, 2009 for reais into U.S. dollars of R$1.9516 to U.S.$1.00.

(3)	Principally provisions for legal and tax contingencies.

(4)	Net provisions to the credit loss allowance less recoveries of loans previously written off.

(5)	Includes dividends based on net income and dividends based on reserves.

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	Santander Brasil
	For the year ended December 31,
	2008 (pro forma)(1)			2008			2007
	(in millions of R$, except as otherwise indicated)
Interest and similar income		38,102			23,768			13,197
Interest expense and similar charges		(18,872	)		(12,330	)		(7,002	)
Net interest income		19,230			11,438			6,195
Income from equity instruments		39			37			36
Share of results of entities accounted for using the equity method		305			112			6
Fee and commission income		6,849			4,809			3,364
Fee and commission expense		(983	)		(555	)		(266	)
Gains/losses on financial assets and liabilities (net)		(485	)		(1,286	)		1,517
Exchange differences (net)		1,261			1,476			382
Other operating income (expenses)		(74	)		(60	)		133
Total income		26,143			15,971			11,367
Administrative expenses		(11,532	)		(7,185	)		(4,460	)
Depreciation and amortization		(1,236	)		(846	)		(580	)
Provisions (net)(2)		(1,702	)		(1,230	)		(1,196	)
Impairment losses on financial assets (net) (3)		(6,570	)		(4,100	)		(2,160	)
Impairment losses on other assets (net)		(85	)		(77	)		(298	)
Gains/losses on disposal of assets not classified as non-current assets held for sale		33			7			1
Gains/losses on disposal of non-current assets held for sale		22			9			13
Profit before tax		5,072			2,549			2,687
Income tax		(1,159	)		(170	)		(784	)
Consolidated profit for the year		3,913			2,379			1,903

Earnings per share
Basic and diluted earnings per 1,000 share
Common shares (reais)		11.65			11.59			14.02
Preferred shares (reais)		12.81			12.75			15.43
Common shares (U.S. dollars)(4)		6.01			5.94			7.18
Preferred shares (U.S. dollars)(4)		6.60			6.53			7.91
Dividends and interest on capital per 1,000 shares(5)
Common shares (reais)					4.26			16.30
Preferred shares (reais)					4.69			17.93
Common shares (U.S. dollars)(4)					2.18			8.35
Preferred shares (U.S. dollars)(4)					2.40			9.19
Weighted average shares outstanding (in thousands) – basic and diluted
Common shares		171,800,386			104,926,194			69,383,705
Preferred shares		149,283,961			91,168,064			60,285,449

(1)	See “Unaudited Pro Forma Consolidated Financial Information” for more information.

(2)	Principally provisions for legal and tax contingencies.

(3)	Net provisions to the credit loss allowance less recoveries of loans previously written off.

(4)	Translated for convenience only using the selling rate as reported by the Central Bank at June 30, 2009 for reais into U.S. dollars of R$1.9516 to U.S.$1.00.

(5)	Includes dividends based on net income and dividends based on reserves.

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Santander Brasil Balance Sheet Data

	Santander Brasil
	At June 30,		At June 30,		At December 31,
	2009		2009		2008		2007
	(in millions of U.S.$)(1)		(in millions of R$)
Assets
Cash and balances with the Brazilian Central Bank		12,714		24,813		23,700		22,277
Financial assets held for trading		8,101		15,809		19,986		12,293
Other financial assets at fair value through profit or loss		3,109		6,068		5,575		1,648
Available-for-sale financial assets		15,676		30,593		30,736		9,303
Loans and receivables		82,826		161,644		162,725		55,034
Hedging derivatives		91		178		106		—
Non-current assets held for sale		30		58		113		32
Investments		257		502		634		55
Tangible assets		1,845		3,600		3,829		1,111
Intangible assets		15,674		30,589		30,995		1,799
Tax assets		6,860		13,388		12,920		4,223
Other assets		838		1,636		2,871		544
Total assets		148,021		288,878		294,190		108,319

Liabilities
Financial liabilities held for trading		2,504		4,887		11,210		4,650
Other financial liabilities at fair value through profit or loss		186		363		307		690
Financial liabilities at amortized cost		106,397		207,644		213,973		84,781
Deposits from the Brazilian Central Bank		446		870		185		—
Deposits from credit institutions		11,167		21,793		26,325		18,217
Customer deposits		79,382		154,922		155,495		55,147
Marketable debt securities		5,790		11,299		12,086		2,806
Subordinated liabilities		5,634		10,996		9,197		4,210
Other financial liabilities		3,978		7,764		10,685		4,401
Hedging derivatives		32		63		265		—
Provisions(2)		5,228		10,203		8,915		4,816
Tax liabilities		3,767		7,352		6,156		1,719
Other liabilities		3,361		6,560		3,527		1,454
Total liabilities		121,476		237,072		244,353		98,111
Shareholders’ equity		26,202		51,136		49,318		8,671
Minority interests		3		5		5		—
Valuation adjustments		341		665		514		1,537
Total equity		26,545		51,806		49,837		10,208
Total liabilities and equity		148,021		288,878		294,190		108,319

Average assets		147,558		287,974		163,621		100,243
Average interest-bearing liabilities		95,598		186,569		109,455		69,204
Average shareholders’ equity		26,000		50,742		23,110		10,521

(1)	Translated for convenience only using the selling rate as reported by the Central Bank at June 30, 2009 for reais into U.S. dollars of R$1.9516 to U.S.$1.00.

(2)	Provisions for pensions and contingent liabilities.

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Santander Brasil Ratios

	At and for the six months ended June 30,						At and for the year ended December 31,
	2009			2008			2008			2007
Profitability and performance
Net yield(1)(2)		9.9	%		7.6	%		8.6	%		7.2	%
Return on average total assets(1)		1.7	%		1.3	%		1.5	%		1.9	%
Return on average shareholders’ equity(1)		9.9	%		14.8	%		10.3	%		18.1	%
Adjusted return on average shareholders’ equity(1)(3)		21.9	%		14.8	%		16.8	%		18.1	%
Capital adequacy
Average shareholders’ equity as a percentage of average total assets		17.6	%		9.4	%		14.1	%		10.5	%
Average shareholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill(3)		9.0	%		9.4	%		9.2	%		10.5	%
Basel capital adequacy ratio(4)		17.0	%		13.6	%		14.7	%		14.2	%
Asset quality
Non-performing assets as a percentage of total loans(5)		6.7	%		4.6	%		5.4	%		4.1	%
Non-performing assets as a percentage of total assets(5)		3.3	%		1.9	%		2.6	%		2.2	%
Non-performing assets as a percentage of computable credit risk(5)(6)		5.8	%		3.3	%		4.7	%		3.2	%

Allowance for credit losses as a percentage of non-performing assets(5)		97.1	%		112.2	%		105.8	%		107.5	%
Allowance for credit losses as a percentage of total loans		6.5	%		5.1	%		5.7	%		4.4	%
Net loan charge-offs as a percentage of total loans(1)		3.0	%		2.9	%		2.3	%		4.7	%
Non-performing assets as a percentage of shareholders’ equity(5)		18.4	%		21.5	%		15.7	%		24.1	%
Non-performing assets as a percentage of shareholders’ equity excluding goodwill(3)(5)		39.5	%		21.5	%		35.4	%		24.1	%
Liquidity
Total loans, net as a percentage of total funding		65.3	%		52.9	%		66.0	%		60.7	%
Deposits as a percentage of total funding		88.9	%		88.7	%		89.5	%		91.3	%
Other Information
Efficiency
Efficiency ratio(7)		34.7	%		40.8	%		45.0	%		39.2	%

(1)	Six month ratios are presented on an annualized basis by doubling the earnings component. Annualized ratios are not necessarily indicative of the ratios that would result for the entire year, which may be materially different from the annualized ratios.

(2)	Net yield is defined as net interest income (including dividends on equity securities) divided by average interest earning assets.

(3)

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equity,” “Average shareholders’ equity as a percentage of average total assets” and “Non-performing assets as a percentage of shareholders’ equity”, to exclude the R$27.5 billion goodwill arising from the acquisition of Banco Real in 2008.

The reconciliation below presents the calculation of these non-GAAP financial measurements from their respective most directly comparable GAAP financial measurements. Such reconciliation was made only for the six months ended June 30, 2009 and the year ended December 31, 2008 because goodwill was not material in the six months ended June 30, 2008 or the year ended December 31, 2007 and, accordingly, the ratios presented are unaffected by the exclusion of goodwill.

	At and for the six months ended June 30, 2009			At and for the year ended December 31, 2008
Return on average shareholders’ equity:
Net income		2,445,145			2,378,626
Average shareholders' equity		50,741,631			23,109,873
Return on average shareholders’ equity		9.9	%		10.3	%
Adjusted return on average shareholders’ equity:
Net income		2,445,145			2,378,626
Average shareholders' equity		50,741,631			23,109,873
Average goodwill		27,289,961			8,924,823
Average shareholders' equity excluding goodwill		23,451,670			14,185,050
Adjusted return on average shareholders’ equity		21.9	%		16.8	%
Average shareholders’ equity as a percentage of average total assets:
Average shareholders' equity		50,741,631			23,109,873
Average total assets		287,974,048			163,621,250
Average shareholders’ equity as a percentage of average total assets		17.6	%		14.1	%
Average shareholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill:
Average shareholders' equity		50,741,631			23,109,873
Average Goodwill		27,289,961			8,924,823
Average shareholders’ equity excluding goodwill		23,451,670			14,185,050
Average total assets		287,974,048			163,621,250
Average Goodwill		27,289,961			8,924,823
Average total assets excluding goodwill		260,684,087			154,696,427
Average shareholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill		9.0	%		9.2	%
Non-performing assets as a percentage of shareholders’ equity:
Non-performing assets		9,430,815			7,730,464
Shareholders' equity		51,135,477			49,317,582
Non-performing assets as a percentage of shareholders’ equity		18.4	%		15.7	%
Non-performing assets as a percentage of shareholders’ equity excluding goodwill:
Non-performing assets		9,430,815			7,730,464
Shareholders' equity		51,135,477			49,317,582
Goodwill		27,263,159			27,488,426
Shareholders' equity excluding goodwill		23,872,318			21,829,156
Non-performing assets as a percentage of shareholders’ equity excluding goodwill		39.5	%		35.4	%

Our calculation of these non-GAAP measures may differ from the calculation of similarly titled measures used by other companies. The Bank’s management believes that these non-GAAP financial measures provide useful information to investors given the substantial impact of the R$27.5 billion goodwill arising from the acquisition of Banco Real during the year ended December 31, 2008, which obscures the significance of other factors.

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(4)

Excludes goodwill. Basel capital adequacy ratios for 2008 and 2007 are not comparable due to changes in the calculation of these ratios according to Central Bank requirements. Basel adequacy ratios for 2009 and 2008 are not comparable due to changes in the calculation of these ratios according to Basel I/Basel II standards.

(5)	Non-performing assets include all credits past due by more than 90 days and other doubtful credits.

(6)	Computable credit risk is the sum of the face amounts of loans and leases (including non-performing assets), guarantees and documentary credits.

(7)	Efficiency ratio is defined as administrative expenses divided by total income. The ratio for the six months ended June 30, 2008 is presented on a pro forma basis. See “Unaudited Pro Forma Consolidated Financial Information”.

Banco Real Combined Income Statement Data

	Banco Real (Combined)
	For the period from January 1 to August 29,						For the year ended December 31,
	2008			2007			2007
	(in millions of R$, except as otherwise indicated)
Interest and similar income		14,007			12,075			19,070
Interest expense and similar charges		(6,552	)		(5,211	)		(7,800	)
Net interest income		7,455			6,864			11,270
Income from equity instruments		2			13			18
Income from companies accounted for by the equity method		193			137			183
Fee and commission income		2,040			1,635			2,525
Fee and commission expense		(428	)		(479	)		(762	)
Gain/loss on financial assets and liabilities (net)		798			870			1,744
Exchange differences (net)		(215	)		(153	)		(179	)
Other operating income (expenses)		(17	)		(146	)		(287	)
Total income		9,828			8,741			14,512
Administrative expenses		(4,347	)		(3,760	)		(6,227	)
Depreciation and amortization		(288	)		(211	)		(339	)
Provision (net)		(472	)		(303	)		(928	)
Impairment losses on financial assets (net)		(2,470	)		(1,838	)		(2,897	)
Impairment losses on other assets (net)		(8	)		(36	)		(33	)
Gain/(losses) on disposal of assets not classified as non-current assets held for sale		25			20			28
Gain/(losses) on non-current assets held for sale		13			36			38
Operating profit before taxes		2,281			2.649			4,154
Income taxes		(907	)		(1,115	)		(1,721	)
Profit for the year/period		1,374			1,534			2,433
Profit attributable to the Parent		1,374			1,534			2,432
Profit attributable to minority interests		—			—			1

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Banco Real Combined Balance Sheet Data

	Banco Real (Combined)
	At December 31, 2007
	(in millions of R$)
Cash and balances with the Brazilian Central Bank		10,949
Financial assets held for trading		3,396
Other financial assets at fair value through profit or loss		147
Available for sale financial assets		12,779
Loans and receivables		77,310
Hedging derivatives		651
Non-current assets held for sale		39
Investments in associates		333
Tangible assets		1,051
Intangible assets		1,207
Tax assets		3,980
Other assets		985
Total assets		112,827
Financial liabilities held for trading		1,725
Financial liabilities at amortized cost		90,672
Hedging derivatives		5
Provisions		3,443
Tax liabilities		2,129
Other liabilities		1,695
Total liabilities		99,669
Shareholders’ equity		13,094
Issued capital		9,322
Reserves		1,542
Profit for the year attributable to the Parent		2,432
Less: Dividends and remuneration		(202	)
Valuation adjustments		59
Minority interests		5
Total equity		13,158
Total liabilities and equity		112,827

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RISK FACTORS

You should carefully consider the risks described below, as well as the other information in this prospectus, before deciding to purchase our units and ADSs. Our business, results of operations, financial condition or prospects could be adversely affected if any of these risks occurs, and as a result, the market price of our units and the ADSs could decline and you could lose all or part of your investment. The risks described below are those known to us and that we currently believe may materially affect us.

Risks Relating to Brazil

The Brazilian government has exercised, and continues to exercise, significant influence over the Brazilian economy. This involvement, as well as Brazilian political and economic conditions, could adversely affect us and the market price of our securities.

The Brazilian government frequently intervenes in the Brazilian economy and occasionally makes significant changes in policies and regulations. The Brazilian government’s actions to control inflation and other policies and regulations have often involved, among other measures, increases in interest rates, changes in tax policies, price controls, currency devaluations, capital controls and limits on imports. Our business, financial condition and results of operations, as well as the market price of our securities, may be adversely affected by changes in policies or regulations involving or affecting factors such as:

·	interest rates;

·	exchange rates and controls and restrictions on the movement of capital out of Brazil, such as those which were briefly imposed in 1989 and early 1990;

·	currency fluctuations;

·	inflation;

·	liquidity of the domestic capital and lending markets;

·	tax and regulatory policies; and

·	other political, social and economical developments in or affecting Brazil.

Although the Brazilian government has implemented sound economic policies over the last few years, uncertainty over whether the Brazilian government will implement changes in policy or regulation affecting these or other factors in the future may contribute to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities markets and in the securities issued abroad by Brazilian issuers. These uncertainties and other developments in the Brazilian economy may adversely affect us and the market value of our securities.

Government efforts to combat inflation may hinder the growth of the Brazilian economy and could harm our business.

Brazil has in the past experienced extremely high rates of inflation and has therefore followed monetary policies that have resulted in one of the highest real interest rates in the world. Inflation and the Brazilian government’s measures to fight it, principally through the Central Bank, have had and may have significant effects on the Brazilian economy and our business. Tight monetary policies with high interest rates and high compulsory deposit requirements may restrict Brazil’s growth and the availability of credit, reduce our loan volumes and increase our loan loss provisions. Conversely, more lenient government and Central Bank policies and interest rate decreases may trigger increases in inflation, and, consequently, growth volatility and the need for sudden and significant interest rate increases, which could negatively affect our interest rate spreads.

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increased the base interest rate several times from 16.0% per annum on August 18, 2004 to 19.75% per annum on May 18, 2005. During the following two years, favorable macroeconomic figures and controlled inflation within the Central Bank target range led the Central Bank to lower the base interest rate several times from 18.0% in December of 2005 to 11.25% in September of 2007. In April and June of 2008, however, the Central Bank increased the base interest rate by 0.5% respectively, to 12.25%, due to the then macroeconomic conditions and the expectations of inflation in 2008. In June 2009, the Central Bank reduced the base interest rate in order to encourage an increase in the availability of credit and the SELIC rate was lowered to 9.25%.

As a bank in Brazil, the vast majority of our income, expenses, assets and liabilities are directly tied to interest rates. Therefore, our results of operations and financial condition are significantly affected by inflation, interest rate fluctuations and related government monetary policies, all of which may materially and adversely affect the growth of the Brazilian economy, our loan portfolios, our cost of funding and our income from credit operations.

Exchange rate instability may have a material adverse effect on the Brazilian economy and Santander Brasil.

The Brazilian currency has during the last decades experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. Between 2000 and 2002, the real depreciated significantly against the U.S. dollar, reaching a selling exchange rate of R$3.53 per U.S.$1.00 at the end of 2002. Between 2003 and mid-2008, the real appreciated significantly against the U.S. dollar due to the stabilization of the macro-economic environment and a strong increase in foreign investment in Brazil, with the exchange rate reaching R$1.56 per U.S.$1.00 in August 2008. In the context of the crisis in the global financial markets since mid-2008, the real depreciated 31.9% against the U.S. dollar in 2008. On June 30, 2009, the exchange rate was R$1.9516 per U.S.$1.00.

Depreciation of the real against the U.S. dollar could create inflationary pressures in Brazil and cause increases in interest rates, which could negatively affect the growth of the Brazilian economy as a whole and harm our financial condition and results of operations. Additionally, depreciation of the real could make our foreign currency-linked obligations and funding more expensive, negatively affect the market price of our securities portfolios and have similar consequences for our borrowers. On the other hand, appreciation of the real relative to the U.S. dollar and other foreign currencies could lead to a deterioration of the Brazilian foreign exchange current accounts, as well as dampen export-driven growth. Depending on the circumstances, either depreciation or appreciation of the real could materially and adversely affect the growth of the Brazilian economy and our business, financial condition and results of operations.

Developments and the perception of risk in other countries, especially in the United States and in emerging market countries, may adversely affect our access to financing and the market price of our securities.

The market value of securities of Brazilian issuers is affected by economic and market conditions in other countries, including the United States and other Latin American and emerging market countries. Although economic conditions in those countries may differ significantly from economic conditions in Brazil, investor’s reactions to developments in these other countries may have an adverse effect on the market value of securities of Brazilian issuers. Crises in other emerging countries may diminish investor interest in securities of Brazilian issuers, including Santander Brasil’s securities. This could adversely affect the market price of our units and could also make it more difficult for us to access the capital markets and finance our operations in the future on acceptable terms, or at all. In addition, the global financial crisis has had significant consequences, including in Brazil, such as stock and credit market volatility, unavailability of credit, higher interest rates, a general economic slowdown, volatile exchange rates, among others, which may, directly or indirectly, adversely affect us and the market price of our units or ADSs.

Risks Relating to Santander Brasil and the Brazilian Financial Services Industry

We are vulnerable to the current disruptions and volatility in the global financial markets as well as to government action intended to alleviate the effects of the recent financial crisis.

The global financial markets deteriorated sharply beginning in the second half of 2007, resulting in a prolonged credit and liquidity crisis that has begun to ease following the first quarter of 2009. A number of major financial institutions, including some of the largest global commercial banks, investment banks, mortgage lenders, mortgage

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guarantors and insurance companies, experienced significant difficulties. In particular, banks in many markets globally faced decreased liquidity or a complete lack of liquidity, rapid deterioration of financial assets in their balance sheets and resulting decreases in their capital ratios that severely constricted their ability to engage in further lending activity. We routinely transact with such institutions as counterparties in the financial services industry, as well as brokers and dealers, commercial banks, investment banks, mutual and hedge funds, and other institutional customers. While the severity of the credit and liquidity crisis has eased in the second quarter of 2009, the financial industry continues to recover from the effects of the crisis. If significant financial counterparties experience ongoing liquidity problems or the financial services industry in general is unable to recover from the effects of the crisis, it could have a material adverse effect on our business, financial condition and results of operations.

In addition, the financial condition of our borrowers has, in some instances, been adversely affected by the financial and economic crisis, which has in turn increased our non-performing loans, impair our loans and other financial assets and result in decreased demand for borrowings in general. For example, certain of our customers that are large exporters, suffered significant losses in connection with hedging positions with respect to the U.S. dollar when the real began to decline in value against the U.S. dollar in 2008. These losses could impact such customers’ ability to repay or refinance their debt obligations to us. If our customers fail to perform their obligations under their contracts with us where the customers are counterparty (for instance, derivatives contracts), the failure or inability of our customers to perform their payment obligations under those contracts could have a material adverse effect on us.

Despite the extensive government and central bank intervention to prevent the failure of the global financial system, the final impacts of such intervention are unknown. Global investor confidence is only beginning to recover and additional disruption and volatility in the global financial markets could have further negative effects on the Brazilian financial and economic environment. In addition, a prolonged economic downturn would result in a general reduction in business activity and a consequent loss of income. Any such ongoing disruption or reduction in business activity could have an adverse effect on our business, financial condition and results of operations.

Changes in regulation may negatively affect us.

Brazilian financial markets, including all of our businesses, are subject to extensive and continuous regulatory review by the Brazilian government, principally by the Central Bank and the CVM. We have no control over government regulations, which govern all facets of our operations, including regulations that impose:

·	minimum capital requirements;

·	compulsory deposit and/or reserve requirements;

·	requirements for investments in fixed rate assets;

·	lending limits and other credit restrictions, including compulsory allocations;

·	limits and other restrictions on fees;

·	limits on the amount of interest banks can charge or the period for capitalizing interest;

·	accounting and statistical requirements; and

·	other requirements or limitations in the context of the global financial crisis.

The regulatory structure governing Brazilian financial institutions is continuously evolving and the Central Bank has proven to very actively and extensively react to developments in our industry. For example, in early 2008, the Central Bank created a compulsory deposit requirement on interbank deposits from leasing companies and since our leasing company invests most of its available cash in interbank deposits with us, this could have an adverse effect on our cost of funding. Central Bank measures and the amendment of existing laws and regulations or the adoption of new laws or regulations could adversely affect our ability to provide loans, make investments or render certain financial services.

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Our securities and derivative financial instruments are subject to market price and liquidity variations due to changes in economic conditions and may produce material losses.

Financial instruments and securities represent a significant amount of our total assets. Any realized or unrealized future gains or losses from these investments or hedging strategies could have a significant impact on our income. These gains and losses, which we account for when we sell or mark-to-market investments in financial instruments, can vary considerably from one period to another. If, for example, we enter into derivatives transactions to protect us against decreases in the value of the real or in interest rates and the real instead increases in value or interest rates increase, we may incur financial losses. We cannot forecast the amount of gains or losses in any future period, and the variations experienced from one period to another, do not necessarily provide a meaningful forward-looking reference point. Gains or losses in our investment portfolio may create volatility in net revenue levels, and we may not earn a return on our consolidated investment portfolio, or on a part of the portfolio in the future. Any losses on our securities and derivative financial instruments could materially and adversely affect our operating income and financial condition. In addition, any decrease in the value of these securities and derivatives portfolios may result in a decrease in our capital ratios, which could impair our ability to engage in lending activity at the levels we currently anticipate.

Changes in base interest rates by the Central Bank could adversely affect our results of operations and profitability.

The Central Bank’s Monetary Policy Committee (Comitê de Política Monetária do Banco Central – COPOM) establishes the base interest rate for the Brazilian banking system, and uses this rate as an instrument of monetary policy. The base interest rate is the benchmark interest rate payable to holders of some securities issued by the Brazilian government and traded at the Sistema Especial de Liquidação e Custódia, the Special System for Settlement and Custody, or “SELIC”. As of December 31, 2004, 2005, 2006, 2007 and 2008, the basic interest rate was 17.8%, 18.0%, 13.3%, 11.3% and 13.8%, respectively.

Since 2001, the Central Bank has frequently adjusted the base interest rate. The Central Bank reduced the base interest rate during the second half of 2003 and the first half of 2004. In order to control inflation, the Central Bank increased the base interest rate several times from 16.0% per annum on August 18, 2004 to 19.75% per annum on May 18, 2005. During the following two years, favorable macroeconomic figures and controlled inflation within the Central Bank target range led the Central Bank to lower the base interest rate several times from 18.0% in December of 2005 to 11.25% in September of 2007. In April and June of 2008, however, the Central Bank increased the base interest rate by 0.5% respectively, to 12.25%, due to the then macroeconomic conditions and the expectations of inflation in 2008. In July 2009, the Central Bank reduced the base interest rate in order to encourage an increase in the availability of credit and the SELIC rate was lowered to 8.75%.

Although increases in the base interest rate typically enable us to increase financial margins, such increases could adversely affect our results of operations by, among other effects, reducing demand for our credit and investment products, increasing our cost of funds and increasing the risk of customer default. Decreases in the base interest rate could also adversely affect our results of operations by, among other effects, decreasing the interest income we earn on our interest-earning assets and lowering margins.

The increasingly competitive environment and recent consolidations in the Brazilian financial services market may adversely affect our business prospects.

The Brazilian financial markets, including the banking, insurance and asset management sectors, are highly competitive. We face significant competition in all of our principal areas of operation from other large Brazilian and international banks, both public and private, and insurance companies. In recent years, the presence of foreign banks and insurance companies in Brazil has grown and competition in the banking and insurance sectors and in markets for specific products has increased.

The acquisition of an insurance company or of a bank by one of our competitors would likely increase such competitor’s market share and customer base, and, as a result, we may face heightened competition. An increase in competition may negatively affect our business results and prospects by, among other things:

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·	limiting our ability to increase our customer base and expand our operations;

·	reducing our profit margins on the banking, insurance, leasing and other services and products we offer; and

·	increasing competition for investment opportunities.

We may experience increases in our level of past due loans as our loan portfolio matures.

Our loan portfolio has grown substantially in recent years. Any corresponding rise in our level of past due loans may lag behind the rate of loan growth. Rapid loan growth may also reduce our ratio of past due loans to total loans until growth slows or the portfolio becomes more seasoned. This may result in increases in our loan loss provisions, charge-offs and the ratio of past due loans to total loans. In addition, as a result of the increase in our loan portfolio and the described lag in any corresponding rise in our level of past due loans, our historic loan loss experience may not be indicative of our future loan loss experience.

Our market, credit and operational risk management policies, procedures and methods may not be fully effective in mitigating our exposure to unidentified or unanticipated risks.

Our market and credit risk management techniques and strategies, including our use of value at risk, or “VaR”, and other statistical modeling tools, may not be fully effective in mitigating our risk exposure in all economic market environments or against all types of risk, including risks that we fail to identify or anticipate. Some of our qualitative tools and metrics for managing risk are based upon our use of observed historical market behavior. We apply statistical and other tools to these observations to arrive at quantifications of our risk exposures. These qualitative tools and metrics may fail to predict future risk exposures. These risk exposures could, for example, arise from factors we did not anticipate or correctly evaluate in our statistical models. This would limit our ability to manage our risks. Our losses thus could be significantly greater than the historical measures indicate. In addition, our quantified modeling does not take all risks into account. Our more qualitative approach to managing those risks could prove insufficient, exposing us to material unanticipated losses. If existing or potential customers believe our risk management is inadequate, they could take their business elsewhere. This could harm our reputation as well as our revenues and profits.

In addition, our businesses depend on the ability to process a large number of transactions efficiently and accurately. Losses can result from inadequate personnel, inadequate or failed internal control processes and systems, information systems failures or from external events that interrupt normal business operations. We also face the risk that the design of our controls and procedures for mitigating operational risk proves to be inadequate or is circumvented. We have suffered losses from operational risk in the past and there can be no assurance that we will not suffer material losses from operational risk in the future.

We may fail to recognize the contemplated benefits of the acquisition of Banco Real.

The value of the units and ADSs could be adversely affected to the extent we fail to realize the benefits we hope to achieve from the integration of Santander and Banco Real, in particular, cost savings and revenue generation arising from integration of the two banks' operations. We may fail to realize these projected cost savings and revenue generation in the time frame we anticipate or at all due to a variety of factors, including our inability to carry out headcount reductions, the implementation of our firm culture and the integration of our back office operations or delays or obstacles in the integration of our information technology platform and operating systems. It is possible that the acquisition could result in the loss of key employees, the disruption of each bank's ongoing business and inconsistencies in standards, controls, procedures and policies and the dilution of brand recognition of the Santander and Banco Real brands. Moreover, the success of the acquisition will at least in part be subject to a number of political, economic and other factors that are beyond our control.

If our reserves for future insurance policyholder benefits and claims are inadequate, we may be required to increase our reserves, which would adversely affect our results of operations and financial condition.

Our insurance companies establish and carry reserves to pay future insurance policyholder benefits and claims. Our reserves do not represent an exact calculation of liability, but rather are actuarial or statistical estimates based on

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models that include many assumptions and projections which are inherently uncertain and involve the exercise of significant judgment, including as to the levels of and/or timing of receipt or payment of premiums, benefits, claims, expenses, interest credits, investment results, retirement, mortality, morbidity and persistency. We cannot determine with precision the ultimate amounts that we will pay for, or the timing of payment of, actual benefits, claims and expenses or whether the assets supporting our insurance policy liabilities, together with future premiums, will be sufficient for payment of benefits and claims. If we conclude that our reserves, together with future premiums, are insufficient to cover future insurance policy benefits and claims, we would be required to increase our reserves in connection with our insurance business and incur income statement charges for the period in which we make the determination, which would adversely affect our results of operations and financial condition.

The profitability of our insurance operations may decline if mortality rates, morbidity rates or persistency rates differ significantly from our pricing expectations.

We set prices for many of our insurance and annuity products based upon expected claims and payment patterns, using assumptions for mortality rates, or likelihood of death, and morbidity rates, or likelihood of sickness, of our insurance policyholders. In addition to the potential effect of natural or man-made disasters, significant changes in mortality or morbidity could emerge gradually over time, due to changes in the natural environment, the health habits of the insured population, treatment patterns for disease or disability, or other factors. Pricing of our insurance and deferred annuity products is also based in part upon expected persistency of these products, which is the probability that a policy or contract will remain in force from one period to the next. Results may also vary based on differences between actual and expected premium deposits and withdrawals for these products. Significant deviations in actual experience from our pricing assumptions could have an adverse effect on the profitability of our insurance products. Although some of our insurance products permit us to increase premiums or adjust other charges and credits during the life of the policy or contract, the adjustments permitted under the terms of the policies or contracts may not be sufficient to maintain profitability. Many of our insurance products do not permit us to increase premiums or adjust other charges and credits or limit those adjustments during the life of the policy or contract.

Our controlling shareholder has a great deal of influence over our business.

Following the offering, Santander Spain, our controlling shareholder, will continue to own, indirectly, approximately % of our common shares, % of our preferred shares and % of our total capital. Due to its share ownership, our controlling shareholder has the power to control us and our subsidiaries, including the power to:

·	elect a majority of our directors and appoint our executive officers, set our management policies and exercise overall control over our company and subsidiaries;

·	agree to sell or otherwise transfer its controlling stake in our company; and

·	determine the outcome of substantially all actions requiring shareholder approval, including transactions with related parties, corporate reorganizations, acquisitions and dispositions of assets, and dividends.

The interests of Santander Spain may differ from our interests or those of our other shareholders and the concentration of control in Santander Spain will limit other shareholders’ ability to influence corporate matters. As a result, we may take actions that our other shareholders do not view as beneficial, which may adversely affect our results of operations and financial condition.

Risks Relating to Our Units and ADSs

Until the Central Bank ratifies our capital increase in connection with this offering, the units will represent subscription receipts, common and preferred shares and not only our common and preferred shares. We cannot provide assurance as to when or if the Central Bank will ratify our capital increase.

Our capital increase must be ratified by the Central Bank in order for the units to represent our common and preferred shares. A capital increase for a financial institution is subject to the deposit of

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government bonds corresponding to the amount of the capital increase with the Central Bank, as well as to the presentation of certain information and documents to the Central Bank. As a result, the ratification of the capital increase for financial institutions occurs after confirmation by the Central Bank that the applicable requirements have been met and applicable banking rules do not require that the Central Bank make its determination within a specified period of time. We have no means of determining when the subscription receipts that will initially underlie the units will be converted into our common and preferred shares.

In the context of this offering, each unit will, until the approval of our capital increase by the Central Bank, represent 47.83 subscription receipts of common shares, 7.17 common shares, 43.48 subscription receipts of preferred shares and 6.52 preferred shares. Until the capital increase is ratified by the Central Bank, investors can only exercise voting rights, if applicable, on the whole number of shares held by them. Subscription receipts, which underlie the units, are not entitled to receive dividends or interest on shareholders’ equity paid in respect of our shares, and not entitled to exercise voting rights. Subscription receipts entitle their holders to receive common and preferred shares, only upon Central Bank ratification. See “Description of Capital Stock”.

In the event that the Central Bank does not approve the capital increase within six months from the closing of this offering, one of our shareholders has agreed to deliver to each record holder of units as of the date of delivery, free of charge, a fraction of a preferred share and a fraction of a common share such that the aggregate numbers of common and preferred shares represented by all units held of record by that holder plus such fractions of shares make up whole numbers of preferred and common shares. For example, a record holder of two units (representing receipts plus 14.34 common shares and 13.04 preferred shares) would receive 0.66 common shares and 0.96 preferred shares. In addition, the capital increase corresponding to the subscription receipts would be cancelled and amounts in respect of such subscription receipts equal to the amount paid for such receipts in this offering would be distributed to the then-current investors. If the market price for units at the time of any such distribution is higher than the public offering price, such amounts will be correspondingly less than the then-implied market value of the receipts.

Cancellation of units may have a material and adverse effect on the market for the units and on the value of the units.

Pursuant to the terms of the custody, issuance and registration agreement between us and , holders of units may present units for cancellation in Brazil in exchange for the common shares and preferred shares underlying these units. If unit holders present a significant number of units for cancellation in exchange for the underlying common shares and preferred shares, the liquidity and price of the units may be materially and adversely affected.

The relative volatility and limited liquidity of the Brazilian securities markets may negatively affect the liquidity and market prices of the units and the ADSs.

Although the Brazilian equity market is the largest in Latin America in terms of capitalization, it is smaller and less liquid than the major U.S. and European securities markets. The BM&FBOVESPA is significantly less liquid than the New York Stock Exchange, or the NYSE, or other major exchanges in the world. As of December 31, 2008, the aggregate market capitalization of the BM&FBOVESPA was equivalent to approximately R$1,375.3 billion (U.S.$588.5 billion) and the top ten stocks in terms of trading volume accounted for approximately 53.1% of all shares traded on BM&FBOVESPA in the year ended December 31, 2008. In contrast, as of December 31, 2008, the aggregate market capitalization of the NYSE was approximately U.S.$9.2 trillion. Although any of the outstanding shares of a listed company may trade on the BM&FBOVESPA, in most cases fewer than half of the listed shares are actually available for trading by the public, the remainder being held by small groups of controlling persons, government entities or a principal shareholder. The relative volatility and illiquidity of the Brazilian securities markets may substantially limit your ability to sell the units or ADSs at the time and price you desire and, as a result, could negatively impact the market price of these securities.

The price of our units and ADSs is subject to volatility.

Before this offering, no public market for our units and ADSs has existed in Brazil and the United States, respectively. The initial public offering price for our units and ADSs will be determined by negotiations between us and the representatives of the international underwriters. The market price for our ADSs may fall below the initial public offering price. The market price of our ADSs could be subject to significant fluctuations due to a variety of factors, including actual or anticipated fluctuations in our operating results and financial performance, economic downturns, political events in the jurisdictions where we operate or other changes in our industries, changes in

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financial estimates by securities analysts, the introduction of new products or technologies by us or our competitors, or our failure to meet expectations of analysts or investors.

Actual or anticipated sales of a substantial number of units or our common shares or preferred shares in the future could decrease the market prices of the ADSs.

Sales of a substantial number of our units or our common shares or preferred shares after the completion of the global offering, or the anticipation of such sales, could negatively affect the market prices of the ADSs. Immediately after completion of the global offering, Santander Spain will, directly or indirectly, own approximately common shares and preferred shares in the aggregate. Subject to some exceptions, we have agreed not to offer, sell or contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the SEC, or the CVM a registration statement relating to, any additional units or ADSs or securities convertible into or exchangeable or exercisable for any shares of our share capital or ADSs, or publicly disclose any such offer, sale, pledge disposition or filing, for a period of 180 days after the date of this prospectus, without the prior written consent of , on behalf of the international and Brazilian underwriters. Our directors, executive officers and our parent company have agreed to substantially similar lock-up provisions, subject to certain exceptions. In connection with our listing on the BM&FBOVESPA, our parent company will need to sell additional shares prior to the anniversary after the date of this prospectus to ensure that the public float represents at least 25 percent of our total capital. If, in the future, substantial sales of units or common shares or preferred shares are made by existing or future holders, the market prices of the ADSs may decrease significantly. As a result, holders of ADSs may not be able to sell their ADSs at or above the price they paid for them.

The economic value of your investment may be diluted.

The estimated initial public offering price of our ADSs is higher than the net tangible book value per unit of our ADSs immediately prior to the offering. If you purchase ADSs in this offering, you will experience immediate and substantial dilution in the net tangible book value per unit from the public offering price. See “Dilution”. In addition, we may need additional funds and, in the case public or private financing is unavailable or if our shareholders decide, we may issue additional units or shares. Any additional funds obtained by such a capital increase may dilute your interest in our company.

Delisting of our shares from Level 2 of BM&FBOVESPA may negatively affect the price of our ADSs and units.

Companies listed on Level 2 of BM&FBOVESPA are required to have a public float of at least 25% of their outstanding shares. We estimate that following the global offering of our units, our public float will be approximately % of our outstanding capital. We will have a grace period of three years from the date of listing our shares on Level 2 of BM&FBOVESPA, extendable for an additional two years upon presentation of a plan to BM&FBOVESPA to comply with the minimum public float requirement. If we do not meet the minimum public float requirement, we may be subject to fines and eventually delisted from Level 2 of BM&FBOVESPA and be traded at the regular level of BM&FBOVESPA. Level 2 regulations are also subject to change and we may not be able to comply with such changes. Although such delisting will result in the obligation of the controlling shareholder to carry out a mandatory tender offer for the shares of the minority shareholders, such delisting may result in decrease of the price of our shares, units and ADSs.

Holders of our units and our ADSs may not receive any dividends or interest on shareholders’ equity.

According to our by-laws, we must generally pay our common shareholders at least 25% of our annual net income as dividends or interest on shareholders’ equity, as calculated and adjusted under the Brazilian corporation law method, which may differ significantly from our net income as calculated under IFRS. This adjusted net income may be capitalized, used to absorb losses or otherwise retained as allowed under the Brazilian corporation law method and may not be available to be paid as dividends or interest on shareholders’ equity. Additionally, the Brazilian corporation law allows a publicly traded company like ours to suspend the mandatory distribution of dividends in any particular year if our board of directors informs our shareholders that such distributions would be inadvisable in view of our financial condition or cash availability. See “Dividends and Dividend Policy—Payment of Dividends and Interest Attributable to Shareholders’ Equity”.

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Holders of ADSs may find it difficult to exercise voting rights at our shareholders’ meetings.

Holders of ADSs will not be direct shareholders of our company and will be unable to enforce directly the rights of shareholders under our by-laws and the Brazilian corporation law. Holders of ADSs may exercise voting rights with respect to the units represented by ADSs only in accordance with the deposit agreement governing the ADSs. Holders of ADSs will face practical limitations in exercising their voting rights because of the additional steps involved in our communications with ADS holders. For example, we are required to publish a notice of our shareholders’ meetings in specified newspapers in Brazil. Holders of our units will be able to exercise their voting rights by attending a shareholders’ meeting in person or voting by proxy. By contrast, holders of ADSs will receive notice of a shareholders’ meeting by mail from the ADR depositary following our notice to the depositary requesting the depository to do so. To exercise their voting rights, holders of ADSs must instruct the ADR depositary on a timely basis. This voting process necessarily will take longer for holders of ADSs than for holders of our units or shares. If the ADR depositary fails to receive timely voting instructions for all or part of the ADSs, the depositary will assume that the holders of those ADSs are instructing it to give a discretionary proxy to a person designated by us to vote their ADSs, except in limited circumstances.

Holders of ADSs also may not receive the voting materials in time to instruct the depositary to vote the units underlying their ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions of the holders of ADSs or for the manner of carrying out those voting instructions. Accordingly, holders of ADSs may not be able to exercise voting rights, and they will have little, if any, recourse if the units underlying their ADSs are not voted as requested.

Holders of ADSs could be subject to Brazilian income tax on capital gains from sales of ADSs.

Law No. 10,833 of December 29, 2003 provides that the disposition of assets located in Brazil by a non-resident to either a Brazilian resident or a non-resident is subject to taxation in Brazil, regardless of whether the disposition occurs outside or within Brazil. This provision results in the imposition of income tax on the gains arising from a disposition of our units by a non-resident of Brazil to another non-resident of Brazil. It is unclear whether ADSs representing our units, which are issued by the ADR depositary outside Brazil, will be deemed to be “property located in Brazil” for purposes of this law. There is no judicial guidance as to the application of Law No. 10,833 of December 29, 2003 and, accordingly, we are unable to predict whether Brazilian courts may decide that it applies to dispositions of our ADSs between non-residents of Brazil. However, in the event that the disposition of assets is interpreted to include a disposition of our ADSs, this tax law would accordingly result in the imposition of withholding taxes on the disposition of our ADSs by a non-resident of Brazil to another non-resident of Brazil. See “Taxation—Brazilian Tax Considerations”.

Because any gain or loss recognized by a U.S. Holder (as defined in “Taxation—Material U.S. Federal Income Tax Considerations for U.S. Holders”) will generally be treated as a U.S. source gain or loss unless such credit can be applied (subject to applicable limitations) against tax due on the other income treated as derived from foreign sources, such U.S. Holder would not be able to use the foreign tax credit arising from any Brazilian tax imposed on the disposition of our units.

Judgments of Brazilian courts with respect to our units or ADSs will be payable only in reais.

If proceedings are brought in the courts of Brazil seeking to enforce our obligations in respect of the units or ADSs, we will not be required to discharge our obligations in a currency other than reais. Under Brazilian exchange control limitations and according to Brazilian laws, an obligation in Brazil to pay amounts denominated in a currency other than reais may be satisfied in Brazilian currency only at the exchange rate, as determined by the Central Bank or competent court, in effect on the date the judgment is obtained, and such amounts are then adjusted to reflect exchange rate variations through the effective payment date. The then prevailing exchange may not afford non-Brazilian investors with full compensation for any claim arising out of or related to our obligations under the units or ADSs.

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Holders of ADSs may be unable to exercise preemptive rights with respect to our units underlying the ADSs.

Holders of ADSs will be unable to exercise the preemptive rights relating to our units underlying ADSs unless a registration statement under the U.S. Securities Act of 1933, as amended, or the “Securities Act”, is effective with respect to those rights or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect to the shares relating to these preemptive rights or to take any other action to make preemptive rights available to holders of units or ADSs. We may decide, in our discretion, not to file any such registration statement. If we do not file a registration statement or if we and the ADR depositary decide not to make preemptive rights available to holders of units or ADSs, those holders may receive only the net proceeds from the sale of their preemptive rights by the depositary, or if they are not sold, their preemptive rights will be allowed to lapse.

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FORWARD-LOOKING STATEMENTS

This prospectus contains estimates and forward-looking statements, principally in “Risk Factors”, “Operating and Financial Review and Prospects” and “Business”. Some of the matters discussed concerning our business operations and financial performance include estimates and forward-looking statements within the meaning of the Securities Act and the Exchange Act.

Our estimates and forward-looking statements are mainly based on our current expectations and estimates on projections of future events and trends, which affect or may affect our businesses and results of operations. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are made in light of information currently available to us. Our estimates and forward-looking statements may be influenced by the following factors, among others:

·	increases in defaults by our customers and in impairment losses,

·	decreases in deposits, customer loss or revenue loss,

·	increases in provisions for contingent liabilities,

·	our ability to sustain or improve our performance,

·	changes in interest rates which may, among other effects, adversely affect margins,

·	competition in the banking, financial services, credit card services, insurance, asset management and related industries,

·	government regulation and tax matters,

·	adverse legal or regulatory disputes or proceedings,

·	credit, market and other risks of lending and investment activities,

·	decreases in our level of capitalization,

·	changes in market values of Brazilian securities, particularly Brazilian government securities,

·	changes in regional, national and international business and economic conditions and inflation, and

·	other risk factors as set forth under “Risk Factors”.

The words “believe”, “may”, “will”, “estimate”, “continue”, “anticipate”, “intend”, “expect” and similar words are intended to identify estimates and forward-looking statements. Estimates and forward-looking statements speak only as of the date they were made, and we undertake no obligation to update or to review any estimate and/or forward-looking statement because of new information, future events or other factors. Estimates and forward-looking statements involve risks and uncertainties and are not guarantees of future performance. Our future results may differ materially from those expressed in these estimates and forward-looking statements. In light of the risks and uncertainties described above, the estimates and forward-looking statements discussed in this prospectus might not occur and our future results and our performance may differ materially from those expressed in these forward-looking statements due to, inclusive, but not limited to, the factors mentioned above. Because of these uncertainties, you should not make any investment decision based on these estimates and forward-looking statements.

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USE OF PROCEEDS

We expect to receive total estimated net proceeds of approximately R$ million, or U.S.$ million, based on the mid-point of the price range set forth on the cover page of this prospectus, converted by a selling exchange rate of R$ to U.S.$1.00 reported by the Central Bank on , 2009. The total estimated net proceeds include approximately R$ million from the subscription of our units in the Brazilian offering, or R$ million if the Brazilian underwriters exercise their over-allotment option in full, and approximately U.S.$ million from the sale of our units, directly or in the form of ADSs in the international offering, or U.S.$ million if the international underwriters exercise the over-allotment option in full, in each case, after deducting estimated underwriting discounts and commissions and expenses of the offerings that are payable by us. Each ADS represents one unit. Each U.S.$1.00 increase (decrease) in the public offering price per ADS would increase (decrease) our net proceeds, after deducting estimated underwriting discounts and commissions and expenses, by U.S.$ (assuming no exercise of the over-allotment option by the international underwriters).

We intend to use the net proceeds from the global offering to expand our business in Brazil by growing our physical presence and increasing our capital base. We also intend to enhance our funding structure and, along with our traditional funding sources, increase our current credit transactions.

In particular, we estimate that we will use: (1) 70% of the net proceeds to expand our physical infrastructure, including by opening new branches and installing additional ATMs, and to fund increased credit transactions in our Commercial Banking and Global Wholesale Banking segments more efficiently than we could do with ordinary funding sources; (2) 20% of the net proceeds to improve our funding structure; and (3) 10% of the net proceeds to increase our capital base, improving our Basel capital adequacy ratio.

See “Capitalization” and “Operating and Financial Review and Prospects” for information on the impact of the net proceeds from this offering on our financial condition.

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MARKET INFORMATION

Prior to this offering, there has been no public market for the ADSs. We cannot assure you that an active trading market will develop for the ADSs, or that the ADSs will trade in the public market subsequent to the global offering at or above the initial public offering price. Each ADS will represent one unit. Each unit represents 55 common shares and 50 preferred shares. The principal trading market for our common shares and preferred shares is the BM&FBOVESPA. Our common shares and preferred shares are listed on the BM&FBOVESPA under the symbols “SANB3” and “SANB4”, respectively. We expect to list the units on the BM&FBOVESPA under the symbol “SAN11”. At June 30, 2009, we had five U.S. record holders.

Price History of Our Preferred Shares and Common Shares

Our common shares and preferred shares began trading on the BMF&FBOVESPA in April 2007 following the merger of Banespa into Banco Santander Meridional S.A., our predecessor company. Banespa was a publicly held company at the time of its merger with us. As a result of the merger, we became a publicly traded company following approval from the CVM on March 2, 2007.

The tables below set forth the high and low closing sales prices for our preferred shares and common shares on the BM&FBOVESPA for the periods indicated. Due to a relatively low public float (approximately 2% of our total shares) our shares have historically traded at low prices which bear no relation to the offering price for the units and ADSs set forth on the cover page of this prospectus.

	BM&FBOVESPA
	Preferred Shares						Common Shares
	High		Low		Average Daily Trading Volume		High		Low		Average Daily Trading Volume
	R$ per share				(thousands of shares)		R$ per share				(thousands of shares)
Year
2007(1)(2)		340.00		0.23		4,939		313.00		0.21		684
2008		0.25		0.10		3,921		0.25		0.11		480
Quarter
First Quarter, 2007(1)		150.00		122.00		1,433		—		—		—
Second Quarter, 2007		200.00		145.00		14,667		189.95		150.00		1,435
Third Quarter, 2007		240.00		166.01		20,136		220.00		160.00		2,132
Fourth Quarter, 2007(2)		340.00		0.23		27,966		313.00		0.21		4,645
First Quarter, 2008		0.25		0.18		8,795		0.25		0.17		1,448
Second Quarter, 2008		0.23		0.19		16,011		0.24		0.20		1,635
Third Quarter, 2008		0.20		0.13		10,002		0.21		0.14		1,559
Fourth Quarter, 2008		0.15		0.10		4,674		0.16		0.11		1,116
First Quarter, 2009		0.14		0.12		5,961		0.15		0.12		564
Second Quarter, 2009		0.15		0.12		7,992		0.14		0.11		1,613
Month
March 2009		0.13		0.12		593		0.13		0.12		422
April 2009		0.13		0.11		2,994		0.14		0.12		2,099
May 2009		0.13		0.12		1,687		0.14		0.12		940
June 2009		0.14		0.12		3,311		0.15		0.12		3,012
July 2009		0.25		0.14		17,256		0.24		0.21		6,257
August 2009	0.25		0.13		13,005		0.24		0.21		7,378

Source: BM&FBOVESPA.

(1)	Common shares started trading on April 3, 2007 and preferred shares started trading on March 6, 2007.

(2)	Prior to November 1, 2007, our common shares and preferred shares each traded in lots of 1,000 shares, and following such date, began trading as individual shares.

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On September 1, 2009, the last reported closing sale price on the BM&FBOVESPA was R$0.21 per preferred share and R$0.21 per common share.

Trading on the BM&FBOVESPA

In 2000, Bolsa de Valores de São Paulo was reorganized through the execution of memoranda of understanding by the Brazilian stock exchanges and assumed all shares traded in Brazil. In 2007, Bolsa de Valores de São Paulo was subject to a corporate reorganization, by which, among other things, the quotas issued by it were transferred to BOVESPA Holding S.A. and Bolsa de Valores de São Paulo S.A. – BVSP. The operations of BOVESPA Holding S.A. and Bolsa de Mercadorias e Futuros – BM&F S.A. were subsequently integrated, resulting in the creation of BM&FBOVESPA S.A. – Bolsa de Valores, Mercadorias e Futuros, or BM&FBOVESPA. In late 2008, Bolsa de Valores de São Paulo – BVSP and Companhia Brasileira de Liquidação e Custódia were merged into BM&FBOVESPA, which currently concentrates all trading activities of shares and commodities in Brazil

Trading on the exchange is conducted by authorized members. Trading sessions take place every business day, from 10:00 a.m. to 5:00 p.m. or from 11:00 a.m. to 6:00 p.m. during daylight savings time in the U.S., on an electronic trading system called Megabolsa. Trading is also conducted between 5:45 p.m. and 7:00 p.m., or between 6:45 p.m. and 7:30 p.m. during daylight savings time in Brazil, in an after-market system connected to both traditional brokerage firms and brokerage firms operating on the Internet. This after-market trading is subject to regulatory limits on price volatility of securities traded by investors operating on the Internet.

In order to maintain control over the fluctuation of the BM&FBOVESPA index, the BM&FBOVESPA has adopted a “circuit breaker” system pursuant to which trading sessions may be suspended for a period of 30 minutes or one hour whenever the BM&FBOVESPA index falls below 10% or 15%, respectively, in relation to the closing index levels of the previous trading session.

When investors trade shares on the BM&FBOVESPA, the trade is settled in three business days after the trade date, without adjustments to the purchase price. The seller is ordinarily required to deliver the shares to the exchange on the third business day following the trade date. Delivery of and payment for shares are made through the facilities of an independent clearing house, the BM&FBOVESPA, which handles the multilateral settlement of both financial obligations and transactions involving securities. According to the regulations of the BM&FBOVESPA, financial settlement is carried out through the system of transfer of funds of the Central Bank and the transactions involving the sale and purchase of shares are settled through the BM&FBOVESPA custody system. All deliveries against final payment are irrevocable.

Regulation of Brazilian Securities Markets

The Brazilian securities market is regulated by the CVM, as provided for by Law 6,385 of December 7, 1976 or the “Brazilian Securities Exchange Law” and Brazilian corporate law. The CMN is responsible for supervising the CVM’s activities, granting licenses to brokerage firms to govern their incorporation and operation, and regulating foreign investment and exchange transactions, as provided for by the Brazilian Securities Exchange Act and Law No. 4595 of December 31, 1964. These laws and regulations provide for, among other things, disclosure requirements, criminal sanctions for insider trading and price manipulation, protection of minority shareholders, the procedures for licensing and supervising brokerage firms and the governance of Brazilian stock exchanges.

Under Brazilian corporate law, a company is either publicly held and listed, a companhia aberta, or privately held and unlisted, a companhia fechada. All listed companies are registered with the CVM and are subject to reporting requirements to periodically disclose information and material facts. A company registered with the CVM may trade its securities either on the Brazilian exchange markets, including the BM&FBOVESPA, or in the Brazilian over-the-counter market. Shares of companies listed on BM&FBOVESPA may not simultaneously trade on the Brazilian over-the-counter market. The over-the-counter market consists of direct trades between persons in which a financial institution registered with the CVM serves as an intermediary. No special application, other than registration with the CVM (and, in case of organized over-the-counter markets, in the applicable one), is necessary for securities of a public company to be traded in this market. To be listed on the BM&FBOVESPA, a company must apply for registration with the BM&FBOVESPA and the CVM.

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The trading of securities on the BM&FBOVESPA may be suspended at the request of a company in anticipation of a material announcement. Trading may also be suspended on the initiative of the BM&FBOVESPA or the CVM, among other reasons, based on or due to a belief that a company has provided inadequate information regarding a significant event or has provided inadequate responses to inquiries by the CVM or the BM&FBOVESPA.

Investment in Our Units by Non-Residents of Brazil

Investors residing outside Brazil are authorized to purchase equity instruments, including our units, or foreign portfolio investments on the BM&FBOVESPA, provided that they comply with the registration requirements set forth in Resolution No. 2,689 of the CMN (or Resolution No. 2,689), and CVM Instruction No. 325.

With certain limited exceptions, Resolution No. 2,689 investors are permitted to carry out any type of transaction in the Brazilian financial capital market involving a security traded on a Brazilian stock, future or organized over-the-counter market. Investments and remittances outside Brazil of gains, dividends, profits or other payments under our units are made through the foreign exchange market.

In order to become a Resolution No. 2,689 investor, an investor residing outside Brazil must:

·	appoint a representative in Brazil with powers to take actions relating to the investment;

·	obtain a taxpayer identification number from the Brazilian tax authorities;

·	appoint an authorized custodian in Brazil for the investments, which must be a financial institution duly authorized by the Central Bank and CVM; and

·	through its representative, register itself as a foreign investor with the CVM and the investment with the Central Bank.

Securities and other financial assets held by foreign investors pursuant to Resolution No. 2,689 must be registered or maintained in deposit accounts or under the custody of an entity duly licensed by the Central Bank or the CVM. In addition, securities trading by foreign investors is generally restricted to transactions involving securities listed on the Brazilian stock exchanges or traded in organized over-the-counter markets licensed by the CVM.

Foreign direct investors under Law No. 4,131/62 may sell their shares in both private and open market transactions, but these investors are currently subject to less favorable tax treatment on gains.

A foreign direct investor under Law No. 4,131/62 must:

·	register as a foreign direct investor with the Central Bank;

·	obtain a taxpayer identification number from the Brazilian tax authorities;

·	appoint a tax representative in Brazil; and

·	appoint a representative in Brazil for service of process in respect of suits based on the Brazilian corporate law.

Resolution No. 1,927 of the CMN, which restated and amended Annex V to Resolution No. 1,289 of the CMN, provides for the issuance of depositary receipts in foreign markets in respect of shares of Brazilian issuers. We filed an application to have the ADSs approved under Resolution 1,927 by the Central Bank and the CVM, and we received final approval on , 2009.

If a holder of ADSs decides to exchange ADSs for the underlying units, the holder will be entitled to (1) sell the units on the BM&FBOVESPA and rely on the depositary’s electronic registration for five business days from the date of exchange to obtain and remit U.S. dollars abroad upon the holder’s sale of our units, (2) convert its investment into a foreign portfolio investment under Resolution No. 2,689/00, or (3) convert its investment into a

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foreign direct investment under Law No. 4,131/62. See “Taxation—Brazilian Tax Considerations” for a description of the tax consequences to an investor residing outside Brazil of investing in our units in Brazil.

If a holder of ADSs wishes to convert its investment into either a foreign portfolio investment under Resolution No. 2,689/00 or a foreign direct investment under Law No. 4,131/62, it should begin the process of obtaining his own foreign investor registration with the Central Bank or with the CVM as the case may be, in advance of exchanging the ADSs for common shares.

The custodian is authorized to update the depositary’s electronic registration to reflect conversions of ADSs into foreign portfolio investments under Resolution No. 2,689/00. If a holder of ADSs elects to convert its ADSs into a foreign direct investment under Law 4,131/62, the conversion will be effected by the Central Bank after receipt of an electronic request from the custodian with details of the transaction. This may also involve the need to change the units into shares.

If a foreign direct investor under Law No. 4,131/62 wishes to deposit its units into the ADR program in exchange for ADSs, such holder will be required to present to the custodian evidence of payment of capital gains taxes. The conversion will be effected by the Central Bank after receipt of an electronic request from the custodian with details of the transaction. This may also involve the need to change the units into shares.

The Brazilian constitution permits foreign individuals or companies to invest in the voting shares of Brazilian financial institutions only if they have specific authorization by the President of Brazil based on national interest or reciprocity. A presidential decree issued on November 13, 1997, issued in respect of Banco Meridional do Brasil S.A. (a predecessor entity) allows up to one hundred percent foreign participation in the capital stock of Santander Brasil. Foreign investors may acquire the shares issued by this offering as a result of this decree. In addition, foreign investors may acquire publicly traded non-voting shares of Brazilian financial institutions negotiated on a stock exchange, or depositary receipts offered abroad representing non-voting shares without specific authorization. See “Regulatory Overview—Foreign Investment in Brazil—Foreign Investment in Brazilian Financial Institutions”.

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CAPITALIZATION

The following table sets forth our consolidated capitalization at June 30, 2009, derived from our unaudited consolidated financial statements prepared in accordance with IFRS:

·	on an actual basis; and

as adjusted to give effect to sale of our units, including units in the form of ADSs, in the global offering, and the receipt of approximately R$ in estimated net proceeds, assuming an offering price of R$ per unit, the mid-point of the price range set forth on the cover page of this prospectus (and assuming that ADSs are offered in the global offering at times that price, reflecting the ratio of units per ADS), after deduction of the underwriting discounts and commissions and estimated offering expenses payable by us in connection with the global offering, and the use of proceeds therefrom and assuming no exercise of the over-allotment by the international underwriters.

You should read this table in conjunction with our financial statements and the related notes and with the sections entitled “Selected Financial and Operating Data” and “Operating and Financial Review and Prospects” included elsewhere in this prospectus.

		At June 30, 2009(1)
		Actual	As Adjusted	Actual(2)		As Adjusted(2)
		(in millions)
Liabilities
Financial liabilities held for trading	R$	4,887	R$	US$	2,504	US$
Other financial liabilities at fair value through profit or loss		363			186
Financial liabilities at amortized cost		207,644			106,397
Deposits from the Brazilian Central Bank		870			446
Deposits from credit institutions		21,793			11,167
Customer deposits		154,922			79,382
Marketable debt securities		11,299			5,790
Subordinated liabilities		10,996			5,634
Other financial liabilities		7,764			3,978
Hedging derivatives		63			32
Provisions		10,203			5,228
Tax liabilities		7,352			3,767
Other liabilities		6,560			3,361
Total liabilities	R$	237,072		US$	121,475
Shareholders’ equity		51,135			26,202
Total capitalization	R$	288,877		US$	148,021

(1)	Total capitalization corresponds to total liabilities plus total shareholders’ equity.

(2)	Translated for convenience only using the selling rate as reported by the Central Bank at June 30, 2009 for reais into U.S. dollars of R$1.9516 to U.S.$1.00.

On August 14, 2009, certain Brazilian asset management, insurance and banking companies, all of which were previously owned by Santander Spain and third party minority shareholders, were transferred to us. These transactions are pending approval by the Central Bank and SUSEP (with respect to the insurance operations). See “Summary—Recent Events”. As a result of these transactions, our capital stock was increased by approximately R$2.5 billion through the issuance of 14,410,886,181 shares, comprised of 7,710,342,899 common shares and 6,700,543,282 preferred shares.

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DILUTION

At June 30, 2009, we had a net tangible book value of R$ , corresponding to a net tangible book value of R$ per unit or U.S.$ per ADS (using the selling rate as reported by the Central Bank at June 30, 2009 for reais into U.S. dollars of R$1.9516 = U.S.$1.00 and the ratio of unit to one ADS). Net tangible book value represents the amount of our total assets less our total liabilities, excluding goodwill and other intangible assets, divided by , the total number of our common and preferred shares outstanding at June 30, 2009.

After giving effect to the sale by us of units offered by us in the global offering, and assuming (1) an offering price of R$ per unit, the mid-point of the price range set forth on the cover page of this prospectus (and assuming that ADSs are offered in the global offering at times that price, reflecting the ratio of units per ADS) and (2) neither the Brazilian underwriters nor the international underwriters have exercised the over-allotment option, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our net tangible book value estimated at , 2009 would have been approximately R$ million, representing R$ per unit, or U.S.$ per ADS. This represents an immediate increase in net tangible book value of R$ per unit or U.S.$ per ADS to existing shareholders and an immediate dilution in net tangible book value of R$ per unit, or U.S.$ per ADS to new investors purchasing units in this offering. Dilution for this purpose represents the difference between the price per unit or ADS paid by these purchasers and net tangible book value per unit or ADS immediately after the completion of the offerings.

The following table illustrates this dilution to new investors purchasing units, including units in the form of ADSs, in the global offering:

	At June 30, 2009
Assumed initial offering price	Units		ADSs(2)
		R$	U.S.$
Net tangible book value per unit or ADS at June 30, 2009
Increase in net tangible book value per unit or ADS attributable to new investors
Pro forma net tangible book value per unit or ADS after the global offering
Dilution per unit or ADS to new investors
Percentage of dilution in net tangible book value per unit or ADS for new investors(1)

(1)	Percentage of dilution for new investors is calculated by dividing the dilution in net tangible book value for new investors by the price of the offering.

(2)	Translated for convenience only using the selling exchange rate as reported by the Central Bank at June 30, 2009 for reais into U.S. dollars at R$1.9516 to U.S.$1.00.

Each R$1.00 or U.S.$1.00 increase (decrease) in the offering price per unit or ADS, respectively, would increase (decrease) the net tangible book value after this offering by R$ per unit or U.S.$ per ADS assuming no exercise of the over-allotment options granted to the underwriters and the dilution to investors in the offering by R$ per unit or U.S.$ per ADS, assuming that the number of units offered in the Brazilian offering and the number of ADSs offered in the international offering, as set forth on the cover page of this prospectus, remain the same.

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EXCHANGE RATES

The Brazilian foreign exchange system allows the purchase and sale of foreign currency and the international transfer of reais by any person or legal entity, regardless of the amount, subject to certain regulatory procedures.

Since 1999, the Central Bank has allowed the real/U.S. dollar exchange rate to float freely, and since then the real/U.S. dollar exchange rate has fluctuated considerably. Between 2000 and 2002, the real depreciated significantly against the U.S. dollar, reaching an exchange rate of R$3.53 per U.S.$1.00 at the end of 2002. Between 2003 and mid-2008, the real depreciated significantly against the U.S. dollar due to the stabilization of the macroeconomic environment and a strong increase in foreign investment in Brazil, with the exchange rate reaching R$1.56 per U.S.$1.00 in August 2008. Since mid-2008, the real has depreciated 31.9% against the U.S. dollar compared to year-end 2008. On June 30, 2009, the exchange rate was R$1.9516 per U.S.$1.00.

The following tables set forth the exchange rate (rounded to the nearest tenth of a cent), expressed in reais per U.S. dollar (R$/U.S.$), for the periods indicated, as reported by the Central Bank.

	Period-end		Average for Period(1)		Low		High
	(per U.S. dollar)
Year Ended:
December 31, 2004		2.654		2.930		2.654		3.205
December 31, 2005		2.341		2.463		2.163		2.762
December 31, 2006		2.138		2.215		2.059		2.371
December 31, 2007		1.771		1.793		1.732		2.156
December 31, 2008		2.337		2.030		1.559		2.500
Month Ended:
March 31, 2009		2.315		2.314		2.238		2.422
April 30, 2009		2.178		2.206		2.170		2.290
May 31, 2009		1.973		2.061		1.973		2.148
June 30, 2009		1.952		1.958		1.921		2.007
July 31, 2009		1.873		1.933		1.873		2.015
August 31, 2009		1.886		1.845		1.818		1.886

(1) Average of the lowest and highest rates in the periods presented.

Source: Central Bank

Exchange rate fluctuation will affect the U.S. dollar equivalent of the market price of our units on the BM&FBOVESPA, as well as the U.S. dollar value of any distributions we make with respect to our units, which will be made in reais. See “Risk Factors—Risks Relating to Brazil”.

Our parent, Santander Spain, reports its financial condition and results of operations in euros. As of June 30, 2009 the exchange rate for euro to real was R$2.73985 per €1.00.

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SELECTED FINANCIAL AND OPERATING DATA

Santander Brasil financial data at and for the years ended December 31, 2008 and 2007 have been derived from the audited consolidated financial statements prepared in accordance with IFRS included in this prospectus. Banco Real has been consolidated with our financial statements since August 30, 2008. The Banco Real financial data at and for the year ended December 31, 2007 and for the period from January 1 to August 29, 2008 have been derived from the audited combined financial statements prepared in accordance with IFRS included in this prospectus. Our results of operations for the year ended December 31, 2008 are not comparable to our results of operations for the year ended December 31, 2007 because of the consolidation of Banco Real in our financial statements as from August 30, 2008. See “Operating and Financial Review and Prospects—Acquisition of Banco Real”.

The selected consolidated financial data at June 30, 2009 and for the six months ended June 30, 2009 and 2008 for Santander Brasil have been derived from the unaudited consolidated interim financial information included elsewhere in this prospectus, which in the opinion of our management, includes all adjustments necessary to present fairly our results of operations and financial condition at the dates and for the periods presented. The results for the six months ended June 30, 2009 are not necessarily indicative of the results of operations that you should expect for the entire year ended December 31, 2009 or any other period.

The selected combined financial data for the period from January 1 to August 29, 2007 for Banco Real have been derived from unaudited combined interim financial information included elsewhere in this prospectus, which in the opinion of our management, include all adjustments necessary to present fairly our results of operations and financial condition at the dates and for the periods presented.

Santander Brasil financial data at December 31, 2005 and 2004 and for the years ended December 31, 2006, 2005 and 2004 have been derived from unaudited combined financial statements prepared in accordance with Brazilian GAAP. Santander Brasil financial data at December 31, 2006 has been derived from unaudited consolidated financial statements prepared in accordance with Brazilian GAAP. See “Presentation of Financial and Other Information”. Because of the material differences in criteria and presentation between Brazilian GAAP and IFRS, such information is not comparable with our financial statements prepared in accordance with IFRS. For a discussion of such differences, see note 45 to our financial statements.

This financial information should be read in conjunction with our audited and unaudited financial statements and the related notes and “Operating and Financial Review and Prospects” included elsewhere in this prospectus.

Santander Brasil Income Statement Data in Accordance with IFRS

	Santander Brasil
	For the six months ended June 30,
	2009		2009		2008 (pro forma)(1)		2008
	(in millions of U.S.$, except as otherwise indicated)(2)		(in millions of R$, except as otherwise indicated)
Interest and similar income	10,131		19,771		17,405		6,715
Interest expense and similar charges	(4,668	)	(9,110	)	(7,978	)	(3,383	)
Net interest income	5,463		10,661		9,427		3,332
Income from equity instruments	8		15		18		16
Share of results of entities accounted for using the equity method	132		257		161		2

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	Santander Brasil
	For the six months ended June 30,
	2009		2009		2008 (pro forma)(1)		2008
	(in millions of U.S.$, except as otherwise indicated)(2)		(in millions of R$, except as otherwise indicated)
Fee and commission income	1,774		3,463		3,440		1,881
Fee and commission expense	(229	)	(447	)	(500	)	(164	)
Gains/losses on financial assets and liabilities (net)	1,401		2,734		1,459		686
Exchange differences (net)	(531	)	(1,037	)	(470	)	(145	)
Other operating income (expenses)	(84	)	(163	)	26		(35	)
Total income	7,934		15,483		13,561		5,573
Administrative expenses	(2,756	)	(5,380	)	(5,535	)	(2,234	)
Depreciation and amortization	(254	)	(495	)	(546	)	(310	)
Provisions (net)(3)	(1,004	)	(1,958	)	(934	)	(522	)
Impairment losses on financial assets (net) (4)	(2,475	)	(4,831	)	(3,194	)	(1,496	)
Impairment losses on other assets (net)	(35	)	(68	)	(15	)	(9	)
Gains/losses on disposal of assets not classified as non-current assets held for sale	586		1,145		38		32
Gains/losses on disposal of non-current assets held for sale	(29	)	(56	)	(14	)	(24	)
Profit before tax	1,967		3,840		3,361		1,010
Income tax	(714	)	(1,395	)	(1,191	)	(303	)
Consolidated profit for the period	1,253		2,445		2,170		707

Earnings per share
Basic and diluted earnings per 1,000 shares
Common shares (reais)			7.17		6.45		5.07
Preferred shares (reais)			7.89		7.09		5.58
Common shares (U.S. dollars)(2)			3.67		4.05		3.18
Preferred shares (U.S. dollars)(2)			4.04		4.45		3.51
Weighted average shares outstanding (in thousands) – basic and diluted
Common shares			174,292,416		172,041,961		71,315,968
Preferred shares			151,465,867		149,503,808		61,969,586

(1)	See “Unaudited Pro Forma Consolidated Financial Information” for more information.

(2)	Translated for convenience only using the selling rate as reported by the Central Bank at June 30, 2009 for reais into U.S. dollars of R$1.9516 to U.S.$1.00.

(3)	Principally provisions for legal and tax contingencies.

(4)	Net provisions to the credit loss allowance less recoveries of loans previously written off.

(5)	Includes dividends based on net income and dividends based on reserves.

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	Santander Brasil
	For the year ended December 31,
	2008 (pro forma)(1)			2008			2007
	(in millions of R$, except as otherwise indicated)
Interest and similar income		38,102			23,768			13,197
Interest expense and similar charges		(18,872	)		(12,330	)		(7,002	)
Net interest income		19,230			11,438			6,195
Income from equity instruments		39			37			36
Share of results of entities accounted for using the equity method		305			112			6
Fee and commission income		6,849			4,809			3,364
Fee and commission expense		(983	)		(555	)		(266	)
Gains/losses on financial assets and liabilities (net)		(485	)		(1,286	)		1,517
Exchange differences (net)		1,261			1,476			382
Other operating income (expenses)		(74	)		(60	)		133
Total income		26,143			15,971			11,367
Administrative expenses		(11,532	)		(7,185	)		(4,460	)
Depreciation and amortization		(1,236	)		(846	)		(580	)
Provisions (net)(2)		(1,702	)		(1,230	)		(1,196	)
Impairment losses on financial assets (net) (3)		(6,570	)		(4,100	)		(2,160	)
Impairment losses on other assets (net)		(85	)		(77	)		(298	)
Gains/losses on disposal of assets not classified as non-current assets held for sale		33			7			1
Gains/losses on disposal of non-current assets held for sale		22			9			13
Profit before tax		5,072			2,549			2,687
Income tax		(1,159	)		(170	)		(784	)
Consolidated profit for the year		3,913			2,379			1,903

Earnings per share
Basic and diluted earnings per 1,000 share
Common shares (reais)		11.65			11.59			14.02
Preferred shares (reais)		12.81			12.75			15.43
Common shares (U.S. dollars)(4)		6.01			5.94			7.18
Preferred shares (U.S. dollars)(4)		6.60			6.53			7.91
Dividends and interest on capital per 1,000 shares(5)
Common shares (reais)					4.26			16.30
Preferred shares (reais)					4.69			17.93
Common shares (U.S. dollars)(4)					2.18			8.35
Preferred shares (U.S. dollars)(4)					2.40			9.19
Weighted average shares outstanding (in thousands) – basic and diluted
Common shares		171,800,386			104,926,194			69,383,705
Preferred shares		149,283,961			91,168,064			60,285,449

(1)	See “Unaudited Pro Forma Consolidated Financial Information” for more information.

(2)	Principally provisions for legal and tax contingencies.

(3)	Net provisions to the credit loss allowance less recoveries of loans previously written off.

(4)	Translated for convenience only using the selling rate as reported by the Central Bank at June 30, 2009 for reais into U.S. dollars of R$1.9516 to U.S.$1.00.

(5)	Includes dividends based on net income and dividends based on reserves.

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Santander Brasil Balance Sheet Data in Accordance with IFRS

	Santander Brasil
	At June 30,		At June 30,		At December 31,
	2009		2009		2008		2007
	(in millions of U.S.$)(1)		(in millions of R$)
Assets
Cash and balances with the Brazilian Central Bank		12,714		24,813		23,700		22,277
Financial assets held for trading		8,101		15,809		19,986		12,293
Other financial assets at fair value through profit or loss		3,109		6,068		5,575		1,648
Available-for-sale financial assets		15,676		30,593		30,736		9,303
Loans and receivables		82,826		161,644		162,725		55,034
Hedging derivatives		91		178		106		—
Non-current assets held for sale		30		58		113		32
Investments		257		502		634		55
Tangible assets		1,845		3,600		3,829		1,111
Intangible assets		15,674		30,589		30,995		1,799
Tax assets		6,860		13,388		12,920		4,223
Other assets		838		1,636		2,871		544
Total assets		148,021		288,878		294,190		108,319

Liabilities
Financial liabilities held for trading		2,504		4,887		11,210		4,650
Other financial liabilities at fair value through profit or loss		186		363		307		690
Financial liabilities at amortized cost		106,397		207,644		213,973		84,781
Deposits from the Brazilian Central Bank		446		870		185		—
Deposits from credit institutions		11,167		21,793		26,325		18,217
Customer deposits		79,382		154,922		155,495		55,147
Marketable debt securities		5,790		11,299		12,086		2,806
Subordinated liabilities		5,634		10,996		9,197		4,210
Other financial liabilities		3,978		7,764		10,685		4,401
Hedging derivatives		32		63		265		—
Provisions(2)		5,228		10,203		8,915		4,816
Tax liabilities		3,767		7,352		6,156		1,719
Other liabilities		3,361		6,560		3,527		1,454
Total liabilities		121,476		237,072		244,353		98,111
Shareholders’ equity		26,202		51,136		49,318		8,671
Minority interests		3		5		5		—
Valuation adjustments		341		665		514		1,537
Total equity		26,545		51,806		49,837		10,208
Total liabilities and equity		148,021		288,878		294,190		108,319

Average assets		147,558		287,974		163,621		100,243
Average interest-bearing liabilities		95,598		186,569		109,455		69,204
Average shareholders’ equity		26,000		50,742		23,110		10,521

(1)	Translated for convenience only using the selling rate as reported by the Central Bank at June 30, 2009 for reais into U.S. dollars of R$1.9516 to U.S.$1.00.

(2)	Provisions for pensions and contingent liabilities.

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Santander Brasil Ratios

	At and for the six months ended June 30,						At and for the year ended December 31,
	2009			2008			2008			2007
Profitability and performance
Net yield(1)(2)		9.9	%		7.6	%		8.6	%		7.2	%
Return on average total assets(1)		1.7	%		1.3	%		1.5	%		1.9	%
Return on average shareholders’ equity(1)		9.9	%		14.8	%		10.3	%		18.1	%
Adjusted return on average shareholders’ equity(1)(3)		21.9	%		14.8	%		16.8	%		18.1	%
Capital adequacy
Average shareholders’ equity as a percentage of average total assets		17.6	%		9.4	%		14.1	%		10.5	%
Average shareholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill(3)		9.0	%		9.4	%		9.2	%		10.5	%
Basel capital adequacy ratio(4)		17.0	%		13.6	%		14.7	%		14.2	%
Asset quality
Non-performing assets as a percentage of total loans(5)		6.7	%		4.6	%		5.4	%		4.1	%
Non-performing assets as a percentage of total assets(5)		3.3	%		1.9	%		2.6	%		2.2	%
Non-performing assets as a percentage of computable credit risk(5)(6)		5.8	%		3.3	%		4.7	%		3.2	%

Allowance for credit losses as a percentage of non-performing assets(5)		97.1	%		112.2	%		105.8	%		107.5	%
Allowance for credit losses as a percentage of total loans		6.5	%		5.1	%		5.7	%		4.4	%
Net loan charge-offs as a percentage of total loans(1)		3.0	%		2.9	%		2.3	%		4.7	%
Non-performing assets as a percentage of shareholders’ equity(5)		18.4	%		21.5	%		15.7	%		24.1	%
Non-performing assets as a percentage of shareholders’ equity excluding goodwill(3)(5)		39.5	%		21.5	%		35.4	%		24.1	%
Liquidity
Total loans, net as a percentage of total funding		65.3	%		52.9	%		66.0	%		60.7	%
Deposits as a percentage of total funding		88.9	%		88.7	%		89.5	%		91.3	%
Other Information
Efficiency
Efficiency ratio(7)		34.7	%		40.8	%		45.0	%		39.2	%

(1)	Six month ratios are presented on an annualized basis by doubling the earnings component. Annualized ratios are not necessarily indicative of the ratios that would result for the entire year, which may be materially different from the annualized ratios.

(2)	Net yield is defined as net interest income (including dividends on equity securities) divided by average interest earning assets.

(3)

“Adjusted return on average shareholders’ equity,” “Average shareholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill” and “Non-performing assets as a percentage of shareholders’ equity excluding goodwill” are non-GAAP financial measurements which adjust “Return on average shareholders’ equity,” “Average shareholders’ equity as a percentage of average total assets” and “Non-performing assets as a percentage of shareholders’ equity”, to exclude the R$27.5 billion goodwill arising from the acquisition of Banco Real in 2008.

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six months ended June 30, 2009 and the year ended December 31, 2008 because goodwill was not material in the six months ended June 30, 2008 or the year ended December 31, 2007 and, accordingly, the ratios presented are unaffected by the exclusion of goodwill.

	At and for the six months ended June 30, 2009			At and for the year ended December 31, 2008
Return on average shareholders’ equity:
Net income		2,445,145			2,378,626
Average shareholders’ equity		50,741,631			23,109,873
Return on average shareholders’ equity		9.9	%		10.3	%
Adjusted return on average shareholders’ equity:
Net income		2,445,145			2,378,626
Average shareholderS’ equity		50,741,631			23,109,873
Average goodwill		27,289,961			8,924,823
Average shareholders' equity excluding goodwill		23,451,670			14,185,050
Adjusted return on average shareholders’ equity		21.9	%		16.8	%
Average shareholders’ equity as a percentage of average total assets:
Average shareholders' equity		50,741,631			23,109,873
Average total assets		287,974,048			163,621,250
Average shareholders’ equity as a percentage of average total assets		17.6	%		14.1	%
Average shareholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill:
Average shareholders' equity		50,741,631			23,109,873
Average Goodwill		27,289,961			8,924,823
Average shareholders’ equity excluding goodwill		23,451,670			14,185,050
Average total assets		287,974,048			163,621,250
Average Goodwill		27,289,961			8,924,823
Average total assets excluding goodwill		260,684,087			154,696,427
Average shareholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill		9.0	%		9.2	%
Non-performing assets as a percentage of shareholders’ equity:
Non-performing assets		9,430,815			7,730,464
Shareholders' equity		51,135,477			49,317,582
Non-performing assets as a percentage of shareholders’ equity		18.4	%		15.7	%
Non-performing assets as a percentage of shareholders’ equity excluding goodwill:
Non-performing assets		9,430,815			7,730,464
Shareholders' equity		51,135,477			49,317,582
Goodwill		27,263,159			27,488,426
Shareholders' equity excluding goodwill		23,872,318			21,829,156
Non-performing assets as a percentage of shareholders’ equity excluding goodwill		39.5	%		35.4	%

(4)

(5)	Non-performing assets include all credits past due by more than 90 days and other doubtful credits.

(6)	Computable credit risk is the sum of the face amounts of loans and leases (including non-performing assets), guarantees and documentary credits.

(7)	Efficiency ratio is defined as administrative expenses divided by total income. The ratio for the six months ended June 30, 2008 is presented on a pro forma basis. See “Unaudited Pro Forma Consolidated Financial Information”.

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Santander Brasil Income Statement Data in Accordance with Brazilian GAAP

	Santander Brasil
	For the year ended December 31,
	2006			2005			2004
	Combined Predecessor Banks
	(in millions of R$)
Financial income
Lending operations		6,885			5,420			4,036
Leasing operations		83			86			69
Securities transactions		5,393			5,100			4,446
Derivative financial instruments		828			1,148			723
Foreign exchange portfolio		83			242			103
Compulsory investments		382			387			276
Total financial income		13,654			12,383			9,653
Financial expenses
Funding operations		(6,614	)		(5,719	)		(3,743	)
Borrowings and onlendings		(485	)		(411	)		(304	)
Allowance for loan losses		(1,523	)		(817	)		(475	)
Total financial expenses		(8,622	)		(6,947	)		(4,522	)
Total profit from financial operations		5,032			5,436			5,131
Other operating (expenses) income
Income from services rendered		2,964			2,410			1,432
Personnel expenses		(1,942	)		(1,949	)		(1,875	)
Other administrative expenses		(2,591	)		(2,422	)		(2,034	)
Tax expenses		(706	)		(669	)		(539	)
Investments in affiliates and subsidiaries		4			1			17
Other operating income (expenses)		(1,266	)		(431	)		(153	)
Income (loss) from operations		1,495			2,376			1,979
Non-operating income (expense)		(45	)		(369	)		(29	)
Income (loss) before taxes on income, profit sharing		1,450			2,007			1,950
Income and social contribution taxes		50			(63	)		(60	)
Profit sharing		(299	)		(258	)		(243	)
Income before minority interest		1,201			1,686			1,647
Minority interest		–			(34	)		(33	)
Net income (loss)		1,201			1,652			1,614

Santander Brasil Balance Sheet Data in Accordance with Brazilian GAAP

	Santander Brasil
	At December 31,
	2006		2005		2004
	Santander Brasil		Combined Predecessor Banks
	(in millions of R$)
Current and noncurrent assets
Cash		1,179		1,592		889
Interbank investments		5,309		10,267		7,384
Securities and derivative financial instruments		39,631		28,686		23,996
Credit portfolio, net		35,887		27,785		20,677
Other assets		18,259		14,883		11,619
Total current and noncurrent assets		100,265		83,213		64,565
Permanent assets		1,762		1,692		2,027

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	Santander Brasil
	At December 31,
	2006		2005		2004
	Santander Brasil		Combined Predecessor Banks
	(in millions of R$)
Total assets		102,027		84,905		66,592
Liabilities
Deposits		31,792		29,799		22,759
Securities sold under repurchase agreements		25,475		20,000		10,950
Funds from acceptance and issuance of securities		1,435		977		1,736
Foreign borrowings		9,960		7,617		6,003
Other liabilities		25,389		19,086		16,834
Total liabilities		94,051		77,479		58,282
Stockholders' equity		7,976		7,426		8,310
Total liabilities and stockholders' equity		102,027		84,905		66,592

Banco Real Combined Income Statement Data in Accordance with IFRS

	Banco Real (Combined)
	For the period from January 1 to August 29,						For the year ended December 31,
	2008			2007			2007
	(in millions of R$, except as otherwise indicated)
Interest and similar income		14,007			12,075			19,070
Interest expense and similar charges		(6,552	)		(5,211	)		(7,800	)
Interest income		7,455			6,864			11,270
Income from equity instruments		2			13			18
Income from companies accounted for by the equity method		193			137			183
Fee and commission income		2,040			1,635			2,525
Fee and commission expense		(428	)		(479	)		(762	)
Gain/loss on financial assets and liabilities (net)		798			870			1,744
Exchange differences (net)		(215	)		(153	)		(179	)
Other operating income (expenses)		(17	)		(146	)		(287	)
Total income		9,828			8,741			14,512
Administrative expenses		(4,347	)		(3,760	)		(6,227	)
Depreciation and amortization		(288	)		(211	)		(339	)
Provision (net)		(472	)		(303	)		(928	)
Impairment losses on financial assets (net)		(2,470	)		(1,838	)		(2,897	)
Impairment losses on other assets (net)		(8	)		(36	)		(33	)
Gain/(losses) on disposal of assets not classified as non-current assets held for sale		25			20			28
Gain/(losses) on non-current assets held for sale		13			36			38
Operating profit before taxes		2,281			2.649			4,154
Income taxes		(907	)		(1,115	)		(1,721	)
Profit for the year/period		1,374			1,534			2,433
Profit attributable to the Parent		1,374			1,534			2,432
Profit attributable to minority interests		—			—			1

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Banco Real Combined Balance Sheet Data in Accordance with IFRS

	Banco Real (Combined)
	At December 31, 2007
	(in millions of R$)
Cash and balances with Brazilian Central Bank		10,949
Financial assets held for trading		3,396
Other financial assets at fair value through profit or loss		147
Available for sale financial assets		12,779
Loans and receivables		77,310
Hedging derivatives		651
Non-current assets held for sale		39
Investments in associates		333
Tangible assets		1,051
Intangible assets		1,207
Tax assets		3,980
Other assets		985
Total assets		112,827
Financial liabilities held for trading		1,725
Financial liabilities at amortized cost		90,672
Hedging derivatives		5
Provisions		3,443
Tax liabilities		2,129
Other liabilities		1,695
Total liabilities		99,669
Shareholders’ equity		13,094
Issued capital		9,322
Reserves		1,542
Profit for the year attributable to the Parent		2,432
Less: Dividends and remuneration		(202	)
Valuation adjustments		59
Minority interests		5
Total equity		13,158
Total liabilities and equity		112,827

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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

The unaudited pro forma consolidated financial information presented below is derived from the historical audited consolidated financial statements of Santander Brasil for the year ended December 31, 2008, the historical unaudited consolidated financial statements of Santander Brasil for the six months ended June 30, 2008, the historical audited combined financial statements of Banco Real for the period from January 1 to August 29, 2008, and the historical unaudited combined financial statements of Banco Real for the six months ended June 30, 2008, each included elsewhere in this prospectus, except for the historical unaudited combined financial statements of Banco Real for the six months ended June 30, 2008, which are not included.

On July 24, 2008, Santander Spain acquired the indirect majority control of the ABN AMRO Real Group in Brazil. On August 29, 2008, as further described in Note 26 to our consolidated financial statements, Banco ABN AMRO Real S.A. and ABN AMRO Brasil Dois Participações S.A. became our wholly-owned subsidiaries pursuant to a share exchange transaction (incorporação de ações) approved by the shareholders of Santander Brasil, Banco ABN AMRO Real S.A. and ABN AMRO Brasil Dois Participações S.A. As a result of the foregoing transactions, Banco ABN AMRO Real S.A. and ABN AMRO Brasil Dois Participações S.A. became wholly-owned subsidiaries of the Bank. See “Business—History—Banco Real Acquisition.” The historical financial statements used to consolidate Banco Real beginning on August 30, 2008 reflect purchase accounting adjustments recorded on the date that Santander Spain acquired control of Banco Real since as from that date Banco Real came under common control with Santander Brasil. The unaudited pro forma consolidated financial information is based upon the historical audited consolidated financial statements and combined financial statements mentioned above, adjusted to give effect to the acquisition of Banco Real, its contribution to the Bank and the share exchange transaction with minority shareholders (incorporação de ações) as if they had occurred on January 1, 2008. The unaudited pro forma consolidated financial information was prepared based on accounting practices under IFRS. The pro forma assumptions and adjustments are described in the accompanying notes presented below.

The unaudited pro forma consolidated financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or the consolidated financial position of Santander Brasil would have been had the acquisition, capital contribution of Banco Real to the Bank and the share exchange transaction with minority shareholders (incorporação de ações), occurred on the date assumed, nor is it necessarily indicative of the consolidated company’s future consolidated results of operations or financial position.

The unaudited pro forma consolidated financial information does not include the anticipated realization of cost savings from any operating efficiencies, synergies or restructurings resulting from the integration of Banco Real and does not contemplate the liabilities that may be incurred in connection with the business combination and any related restructurings.

This unaudited pro forma consolidated financial information should be read in conjunction with the accompanying notes presented below and the historical consolidated financial statements and accompanying notes and combined financial statements and accompanying notes of Santander Brasil and Banco Real, respectively, included elsewhere in this prospectus. You should not rely on the unaudited pro forma consolidated financial information as an indication of either (1) the consolidated results of operations or financial position that would have been achieved if the acquisition of Banco Real had taken place on the date assumed or (2) the consolidated results of operations or financial position of Santander Brasil after the completion of such transaction.

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Pro Forma Income Statement Data For the Six Months Ended June 30, 2008

	Santander Brasil Consolidated Historical Financial Data			Banco Real Combined Historical Financial Data			Pro Forma Adjustments						Pro Forma Consolidated Financial Data
	For the six months ended June, 2008												For the six months ended June, 2008
	(in millions of R$, except as otherwise indicated)
Interest and similar income		6,715			10,213			435			4	(i)		17,405
Interest expense and similar charges		(3,383	)		(4,595	)		42			4	(i)		(7,978	)
Net interest income		3,332			5,618			477						9,427
Income from equity instruments		16			2									18
Share of results of entities accounted for using the equity method		2			159									161
Fee and commission income		1,881			1,559									3,440
Fee and commission expense		(164	)		(336	)								(500	)
Gains/losses on financial assets and liabilities (net)		686			770			3						1,459
Exchange differences (net)		(145	)		(325	)								(470	)
Other operating income (expenses)		(35	)		30			31			4	(i)		26
Total income		5,573			7,477			511						13,561
Administrative expenses		(2,234	)		(3,301	)								(5,535	)
Personnel expenses		(1,156	)		(1,607	)								(2,763	)
Other general administrative expenses		(1,078	)		(1,694	)								(2,772	)
Depreciation and amortization		(310	)		(156	)		(80	)	4(ii)				(546	)
Provisions (net)		(522	)		(412	)								(934	)
Impairment losses on financial assets (net)		(1,496	)		(1,698	)								(3,194	)
Impairment losses on other assets (net)		(9	)		(6	)								(15	)
Gains/losses on disposal of assets not classified as non-current assets		32			6									38
Gains/losses on disposal of non-current assets held for sale		(24	)		10									(14	)
Profit before tax		1,010			1,920			431						3,361
Income tax		(303	)		(742	)		(146	)	4(iii)				(1,191	)
Profit for the year		707			1,178			285						2,170
Earnings per shares
Basic and diluted earnings per 1,000 share (reais)
Common shares		5.07												6.45
Preferred shares		5.58												7.09
Basic and diluted earnings per 1,000 share (U.S. dollars)(1)
Common shares		3.18												4.05
Preferred shares		3.51												4.45
Weighted average shares outstanding (in thousands) – basic and diluted
Common shares		71,315,968												172,041,961
Preferred shares		61,969,586												149,503,808

(1)	Translated for convenience only using the selling rate as reported by the Central Bank at June 30, 2009 for reais into U.S. dollars of R$1.9516 to U.S.$1.00.

See the accompanying notes to the unaudited pro forma consolidated financial information.

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Pro Forma Income Statement Data For the Year Ended December 31, 2008

	Santander Brasil Consolidated Historical Financial Data			Banco Real Combined Historical Financial Data			Pro Forma Adjustments						Pro Forma Consolidated Financial Data
	For the year ended December 31, 2008			For the period from January 1 to August 29, 2008			For the year ended December 31, 2008						For the year ended December 31, 2008
	(in millions of R$, except as otherwise indicated)
Interest and similar income		23,768			14,007			327			4	(i)		38,102
Interest expense and similar charges		(12,330	)		(6,552	)		11			4	(i)		(18,872	)
Net interest income		11,438			7,455			338						19,230
Income from equity instruments		37			2			—						39
Share of results of entities accounted for using the equity method		112			193			—						305
Fee and commission income		4,809			2,040			—						6,849
Fee and commission expense		(555	)		(428	)		—						(983	)
Gains/losses on financial assets and liabilities (net)		(1,287	)		798			4						(485	)
Exchange differences (net)		1,476			(215	)		—						1,261
Other operating income (expenses)		(59	)		(17	)		2			4	(i)		(74	)
Total income		15,971			9,828			344						26,143
Administrative expenses		(7,185	)		(4,347	)		—						(11,532	)
Personnel expenses		(3,548	)		(2,126	)		—						(5,674	)
Other general administrative expenses		(3,637	)		(2,221	)		—						(5,858	)
Depreciation and amortization		(846	)		(288	)		(102	)	4(ii)				(1,236	)
Provisions (net)		(1,230	)		(472	)		—						(1,702	)
Impairment losses on financial assets (net)		(4,100	)		(2,470	)		—						(6,570	)
Impairment losses on other assets (net)		(77	)		(8	)		—						(85	)
Gains/losses on disposal of assets not classified as non-current assets		7			25			—						32
Gains/losses on disposal of non-current assets held for sale		9			13			—						22
Profit before tax		2,549			2,281			242						5,072
Income tax		(170	)		(907	)		(82	)	4(iii)				(1,159	)
Profit for the year		2,379			1,374			160						3,913
Earnings per shares
Basic and diluted earnings per 1,000 share (reais)
Common shares		11.59												11.65
Preferred shares		12.75												12.81
Basic and diluted earnings per 1,000 share (U.S. dollars)(1)
Common shares		5.94												6.01
Preferred shares		6.53												6.60
Weighted average shares outstanding (in thousands) – basic and diluted
Common shares		104,926,194												171,800,386
Preferred shares		91,168,064												149,283,961

(1)	Translated for convenience only using the selling rate as reported by the Central Bank at June 30, 2009 for reais into U.S. dollars of R$1.9516 to U.S.$1.00.

See the accompanying notes to the unaudited pro forma consolidated financial information.

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Notes to the unaudited pro forma consolidated financial information

1. Basis of Presentation

The unaudited pro forma consolidated financial information presented above is derived from the historical unaudited condensed consolidated financial statements for the six months ended June 30, 2008 of Banco Santander and Banco Real and the audited consolidated financial statements for the year ended December 31, 2008 of Santander Brasil and the historical audited combined financial statements of Banco Real for the period from January 1 to August 29, 2008, each included elsewhere in this prospectus, except for the financial statements of Banco Real for the six months ended June 30, 2008.

2. The Acquisition of Banco Real

On July 24, 2008, Santander Spain acquired majority control of the ABN AMRO Real Group in Brazil. On August 29, 2008, as further described in Note 26 to our consolidated financial statements, Banco ABN AMRO Real S.A. and ABN AMRO Brasil Dois Participações S.A. became our wholly-owned subsidiaries pursuant to a share exchange transaction (incorporação de ações) approved by the shareholders of Santander Brasil, Banco ABN AMRO Real S.A. and ABN AMRO Brasil Dois Participações S.A. As a result of the foregoing transactions, Banco ABN AMRO Real S.A. and ABN AMRO Brasil Dois Participações S.A. became wholly-owned subsidiaries of the Bank. Banco Real was consolidated in Santander Brasil’s financial statements as from August 30, 2008. See “Business—History—Banco Real Acquisition”. The historical financial statements used to consolidate Banco Real on August 30, 2008 reflect purchase accounting adjustments recorded on the date that Santander Spain acquired control of Banco Real since as from that date Banco Real came under common control with Santander Brasil.

3. Pro Forma Assumptions and Adjustments

The following assumptions and related pro forma adjustments give effect to our incorporation of Banco Real as if the acquisition of Banco Real by the Santander Group, its capital contribution of Banco Real to us and the share exchange transaction with minority shareholders (incorporação de ações) had occurred on January 1, 2008 for purposes of the unaudited pro forma consolidated financial information.

The unaudited pro forma consolidated financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or the consolidated financial position of Santander Brasil would have been had the acquisition of Banco Real occurred on the respective dates assumed, nor is it necessarily indicative of the combined company’s future consolidated results of operations or financial position.

·	Expected future cash cost savings, if any, are not recognized in this unaudited pro forma consolidated financial information.

The pro forma adjustments include purchase price accounting adjustments to reflect the acquisition of Banco Real by Santander Spain, as if the control of Banco Real was acquired by Santander Spain on January 1, 2008. The purchase accounting was recorded using the acquisition method in accordance with International Financial Reporting Standard No. 3, “Business Combinations”.

Additionally, liabilities may be incurred in connection with any ultimate restructuring activities. These additional liabilities and costs have not been contemplated in the unaudited pro forma consolidated financial information because information necessary to reasonably estimate such costs and to formulate detailed restructuring plans depends on the conclusion of assessments and studies which are still being prepared by Santander Brasil as of the date of this prospectus.

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The pro forma purchase price allocation adjustments are estimated based on the following purchase price allocation:

	At June 30, 2009
	Book value			Fair value(1)			Adjustment
	(in thousands of R$)
Net assets acquired
Assets		132,301,795			130,930,255			(1,371,540	)
Of which:
Cash and balances with central banks		12,147,982			12,147,982			-
Debt instruments		21,758,968			21,728,385			(30,583	)
Loans and advances to customers		69,669,710			68,039,392			(1,630,318	)
Tangible assets		1,072,896			1,344,375			271,479
Liabilities		(119,436,124	)		(120,826,655	)		(1,390,531	)
Of which:
Deposits from credit institutions		(20,946,768	)		(20,932,165	)		14,603
Customer deposits		(75,372,552	)		(75,419,151	)		(46,599	)
Subordinated liabilities		(3,440,670	)		(3,491,143	)		(50,473	)
Other financial liabilities		(5,974,858	)		(5,852,833	)		122,025
Provisions(2)		(3,536,049	)		(4,968,623	)		(1,432,574	)
Net assets acquired		12,865,671			10,103,600			(2,762,071	)
Intangible assets(3)					1,229,716
Fair value of the assets					11,333,316
Total consideration(4)					38,946,426
Satisfied by:
Shares					38,920,753
Cash					25,673
Goodwill					27,613,110

(1)

The fair values of the assets and liabilities acquired were determined based on appraisals for the tangible assets, consideration of advice provided by legal counsel for contingent liabilities in Provisions, and discounted cash flow analysis for all other assets and liabilities, taking into consideration the expected future economic benefits of the intangible assets.

(2)	Includes an adjustment of R$124.7 million booked in the six months ended June 30, 2009 respective to a revision in the fair value of provisions, as permitted under IFRS 3.

(3)	Amount relates to customer list with an estimated useful life of 10 years.

(4)	Total consideration is based on amounts paid by the Santander Group for the acquisition of Banco Real.

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4. Pro forma adjustments

As the purpose of the pro forma is to give the effect of the acquisition of Banco Real, its contribution to the Bank and the share exchange transaction with minority shareholders (incorporação de ações) as if they had occurred on January 1, 2008, the pro forma adjustment considers the period from January 1, 2008 to August 29, 2008 as if the merger and related purchase price allocation had occurred on January 1, 2008 (as the results for the remaining period of 2008, starting on August 29, 2008, are already incorporated in the “Santander Brasil Consolidated Historical Financial Data”).

(i)

This pro forma adjustment relates to the amortization related to the fair value adjustment of assets in the loan portfolio and financial liabilities. As the value of the loans and financial liabilities at amortized cost were adjusted to fair value, this causes an adjustment to the yield curve of the related assets and liabilities in comparison to their nominal value, which is offset pro-rata with this adjustment.

(ii)

The pro forma adjustment relates to the amortization of the fair value adjustment of tangible assets and the amortization of the identifiable and measurable intangible asset recognized in the purchase price allocation, according to the estimated useful lives of such assets.

(iii)

This pro forma adjustment reflects the realization of deferred taxes recognized in the purchase price allocation due to the realization of the amounts in which fair value differed from cost for certain assets and liabilities as shown in the above table. It is based on a 34% tax rate.

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SELECTED STATISTICAL INFORMATION

The following information for Santander Brasil is included for analytical purposes and is derived from and should be read in conjunction with the financial statements contained elsewhere herein as well as “Operating and Financial Review and Prospects”.

Average annual balance sheet data has been calculated based upon the average of the sum of balances at 13 dates: at December 31 of the prior year and each of the month-end balances of the 12 subsequent months. Average income statement and balance sheet data and other related statistical information for Santander Brasil have been prepared on a consolidated basis. As from August 30, 2008, our consolidated financial information includes data of Banco Real. We believe that the average data set forth herein accurately reflect in all material respects our financial condition and results of operations at the dates and for the periods specified.

The selected statistical information set forth below includes information at and for the years ended December 31, 2006, 2005 and 2004 derived from unaudited financial statements prepared in accordance with Brazilian GAAP. See “Presentation of Financial and Other Information”. Because of the material differences in criteria and presentation between Brazilian GAAP and IFRS, such information is not comparable with the selected statistical data at and for the six months ended June 30, 2009 and 2008 and at and for the years ended December 31, 2008 and 2007. For a discussion of such differences, see note 45 to our financial statements. Accordingly, differences between amounts at and for the years ended December 31, 2006, 2005 and 2004 and amounts at and for the years ended December 31, 2008 and 2007 may be due to differences between Brazilian GAAP and IFRS as well as the evolution of our financial condition and results of operations during these years.

Average Balance Sheet and Interest Rates

The following tables show our average balances and interest rates for each of the periods presented. With respect to the tables below and the tables under “—Changes in Net Interest Income—Volume and Rate Analysis” and “—Assets—Earning Assets—Yield Spread”, (1) we have stated average balances on a gross basis, before netting our allowances for credit losses, except for the total average asset figures, which include such netting and (2) all average data have been calculated using month-end balances, which is not significantly different from having used daily averages. We stop accruing interest on loans once they are more than 60 days past due. All our non-accrual loans are included in the table below under “other assets”.

	IFRS For the six months ended June 30,
	2009								2008
	Average Balance			Interest		Average Rate(1)			Average Balance			Interest		Average Rate(1)
Assets and Interest Income	(in millions of R$, except percentages)
Cash and balances with the Brazilian Central Bank		16,838			835		10.2	%		16,714			847		10.4	%
Loans and advances to credit institutions		29,582			1,440		10.0	%		11,504			412		7.3	%
Loans and advances to customers		133,497			15,201		24.1	%		43,761			4,343		20.8	%
Debt instruments		38,714			2,201		11.7	%		16,308			1,080		13.7	%
Other interest-earning assets		—			94		0.0	%		—			33		0.0	%
Total interest-earning assets		218,631			19,771		18.9	%		88,287			6,715		15.8	%
Equity instruments		2,034			15		1.5	%		2,293			16		1.4	%
Investments in affiliated companies		548			—		—			89			—		—
Total earning assets		221,213			19,786		18.7	%		90,669			6,731		15.4	%
Cash and balances with the Central Bank		6,283			—		—			2,566			—		—
Due from credit entities		2,201			—		—			1,042			—		—
Impairment losses		(8,286	)		—		—			(2,636	)		—		—
Others assets		31,774			—		—			11,268			—		—
Tangible assets		3,746			—		—			1,062			—		—
Intangible assets		31,043			—		—			1,800			—		—
Total average assets		287,974			19,786		14.2	%		105,771			6,731		13.1	%

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	IFRS For the year six months ended June 30,
	2009							2008
	Average Balance		Interest		Average Rate(1)			Average Balance		Interest		Average Rate(1)
Liabilities and Interest Expense	(in millions of R$, except percentages)
Deposits from the Brazilian Central Bank		823		1		0.3	%		—		—		—
Deposits from credit institutions		23,783		966		8.3	%		14,889		424		5.8	%
Customer deposits		140,128		6,636		9.7	%		50,587		2,456		9.9	%
Marketable debt securities		11,590		596		10.5	%		3,542		190		11.0	%
Subordinated liabilities		10,244		542		10.9	%		4,376		229		10.7	%
Other interest-bearing liabilities		—		369		—			—		42		—
Total interest-bearing liabilities		186,568		9,110		10.0	%		73,394		3,341		9.3	%
Deposits from credit entities		66		—		—			47		—		—
Customer deposits – demand deposits		12,793		—		—			4,662		—		—
Others liabilities		37,800		—		—			17,756		—		—
Minority interest		5		—		—		n.m.			—		—
Shareholders’ equity		50,742		—		—			9,912		—		—
Total average liabilities and shareholders’ equity		287,974		9,110		6.4	%		105,771		3,341		6.4	%

(1)	Amounts are presented on an annualized basis by doubling the earnings component. Annualized amounts are not necessarily indicative of the amounts that would result for the entire year which may be materially different from the annualized amounts.

	IFRS For the year ended December 31,
	2008							2007
	Average Balance		Interest		Average Rate			Average Balance		Interest		Average Rate
Assets and Interest Income	(in millions of R$, except percentages)
Cash and balances with the Brazilian Central Bank		19,102		2,270		11.9	%		15,717		1,894		12.0	%
Loans and advances to credit institutions		17,390		1,819		10.5	%		8,788		701		8.0	%
Loans and advances to customers		72,178		16,297		22.6	%		39,922		8,047		20.2	%
Debt instruments		22,543		3,327		14.8	%		19,084		2,166		11.3	%
Other interest-earning assets		—		55		—			—		389		—
Total interest-earning assets		131,213		23,768		18.1	%		83,511		13,197		15.8	%
Equity instruments		2,250		37		1.6	%		3,254		36		1.1	%
Investments in affiliated companies		255		—		—			46		—		—
Total earning assets		133,718		23,805		17.8	%		86,811		13,234		15.2	%
Cash and balances with the Central Bank		3,618		—		—			2,440		—		—
Due from credit entities		677		—		—			853		—		—

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	IFRS For the year ended December 31,
	2008								2007
	Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate
Assets and Interest Income	(in millions of R$, except percentages)
Impairment losses		(4,272	)		—		—			(2,196	)		—		—
Others assets		16,488			—		—			10,060			—		—
Tangible assets		1,977			—		—			1,022			—		—
Intangible assets		11,415			—		—			1,253			—		—
Total average assets		163,621			23,805		14.5	%		100,243			13,234		13.2	%

	IFRS For the year ended December 31,
	2008							2007
	Average Balance		Interest		Average Rate			Average Balance		Interest		Average Rate
Liabilities and Interest Expense	(in millions of R$, except percentages)
Deposits from the Central Bank		14		—		—			—		—		—
Deposits from credit institutions		21,411		1,631		7.6	%		18,169		1,362		7.5	%
Customer deposits		75,816		9,146		12.1	%		44,507		4,709		10.6	%
Marketable debt securities		6,331		549		8.7	%		2,348		277		11.8	%
Subordinated liabilities		5,883		690		11.7	%		4,180		452		10.8	%
Other interest-bearing liabilities		—		314		—			—		202		—
Total interest-bearing liabilities		109,455		12,330		11.3	%		69,204		7,002		10.1	%
Deposits from credit entities		80		—		—			67		—		—
Customer deposits – demand deposits		7,112		—		—			4,665		—		—
Others liabilities		23,863		—		—			15,785		—		—
Minority interest		1		—		—			—		—		—
Shareholders’ equity		23,110		—		—			10,522		—		—
Total average liabilities and shareholders’ equity		163,621		12,330		7.6	%		100,243		7,002		7.6	%

	Brazilian GAAP For the year ended December 31, 2006
	Average Balance		Income (Expense)			Average Rate
	(in millions of R$)
Interest-Earning Assets
Lending operations		27,874		6,885			24.7	%
Leasing operations		423		83			19.6	%
Interbank investments, securities transactions and derivative financial instruments		39,767		6,221			15.6	%
Foreign exchange operations		1,180		83			7.0	%
Compulsory investments		3,126		382			12.2	%
Total interest-earning assets		72,369		13,654			18.9	%

Interest-Bearing Liabilities
Funding operations
Time deposits		21,499		(2,906	)		13.5	%
Securities sold under repurchase agreements		20,080		(2,771	)		13.8	%
Savings deposits		4,820		(377	)		7.8	%
Interbank deposits		102		(15	)		14.2	%
Funds from issuance of securities		1,474		(210	)		14.2	%
Subordinated debts		2,343		(267	)		11.4	%
Other		-		(69	)		0.0	%

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	Brazilian GAAP For the year ended December 31, 2006
	Average Balance		Income (Expense)			Average Rate
	(in millions of R$)
Total funding operations		50,318		(6,614	)		13.1	%
Borrowings and onlendings
Foreign borrowings		5,041		(253	)		5.0	%
Domestic onlendings		3,062		(231	)		7.6	%
Total borrowings and onlendings		8,103		(485	)		6.0	%
Total interest-bearing liabilities		58,421		(7,099	)		12.2	%

Changes in Net Interest Income—Volume and Rate Analysis

The following tables allocate the changes in our net interest income between changes in average volume and changes in average rate for the six months ended June 30, 2009 compared to the six months ended June 30, 2008 and for the year 2008 compared to 2007. We have calculated volume variances based on movements in average balances over the period and rate variance based on changes in interest rates on average interest-earning assets and average interest-bearing liabilities. We have allocated variances caused by changes in both volume and rate to volume. You should read the following tables and the footnotes thereto in light of our observations noted in “—Average Balance Sheet and Interest Rates”.

	IFRS For the six months ended 2009/2008
	Increase (decrease) due to changes in
	Volume			Rate			Net change
	(in millions of R$)
Interest and Similar Revenues
Interest-earning assets
Cash and due from central banks		6			(18	)		(12	)
Due from credit entities		836			192			1,028
Loans and credits		10,130			727			10,857
Debt securities		1,293			(173	)		1,120
Other interest-earning assets		62			—			62
Total interest-earning assets		12,327			728			13,055
Investments in equity securities		(2	)		1			(1	)
Total earning assets		12,325			729			13,054

	IFRS For the six months ended 2009/2008
	Increase (decrease) due to changes in
	Volume		Rate			Net change
	(in millions of R$)
Interest and Similar Expenses
Interest-bearing liabilities
Deposits from central bank		1		—			1
Due to credit entities		316		227			543
Customer deposits		4,242		(62	)		4,180
Marketable debt securities		414		(9	)		405
Subordinated debt		310		3			313
Other interest-bearing liabilities		327		—			327
Total interest-bearing liabilities		5,610		159			5,769

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	IFRS 2008/2007
	Increase (decrease) due to changes in
	Volume			Rate			Net change
	(in millions of R$)
Interest and Similar Revenues
Interest-earning assets
Cash and due from central banks		403			(26	)		377
Due from credit entities		848			269			1,117
Loans and credits		7,182			1,067			8,249
Debt securities		437			724			1,161
Other interest-earning assets		(334	)		—			(334	)
Total interest-earning assets		8,536			2,034			10,570
Investments in equity securities		(13	)		14			1
Total earning assets		8,523			2,048			10,571

	IFRS 2008/2007
	Increase (decrease) due to changes in
	Volume		Rate			Net change
	(in millions of R$)
Interest and Similar Expenses
Interest-bearing liabilities
Due to credit entities		246		22			268
Customer deposits		3,700		737			4,437
Marketable debt securities		362		(90	)		272
Subordinated debt		197		41			238
Other interest-bearing liabilities		112		—			112
Total interest-bearing liabilities		4,617		710			5,327

Assets

Earning Assets—Yield Spread

The following tables analyze our average earning assets, interest income and dividends on equity securities and net interest income and shows gross yields, net yields and yield spread for each of the periods indicated. You should read this table and the footnotes thereto in light of our observations noted in “—Average Balance Sheet and Interest Rates”.

	IFRS
	For the six months ended June 30,						For the year ended December 31,
	2009			2008			2008			2007
	(in millions of R$, except percentages)
Average earning assets		221,213			90,669			133,718			86,811
Interest and dividends on equity securities(1)		19,786			6,731			23,805			13,233
Net interest income		10,661			3,332			11,438			6,195
Gross yield(2)(3)		18.7	%		15.4	%		17.8	%		15.2	%
Net yield(3)(4)		9.9	%		7.6	%		8.6	%		7.2	%
Yield spread(3)(5)		8.7	%		6.1	%		6.5	%		5.1	%

(1)	Dividends on equity securities include dividends from companies accounted for by the equity method.

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(2)	Gross yield is the quotient of interest and dividends on equity securities divided by average earning assets.

(3)	Figures for the six months ended June 30, 2009 and 2008 are presented on an annualized basis by doubling the six month earnings component. Annualized figures are not necessarily indicative of the figures that would result for the entire year.

(4)	Net yield is the quotient of net interest income (that includes dividends on equity securities) divided by average earning assets.

(5)	Yield spread is the difference between gross yield on earning assets and the average cost of interest-bearing liabilities.

	Brazilian GAAP For the year ended December 31, 2006
	(in millions of R$, except percentages)
Average earning assets		72,369
Total profit from financial operations before provision for credit losses(1)		6,555
Net interest margin(2)		9.1	%
Net interest spread(3)		6.7	%

(1)	The difference between financial income and expenses.

(2)	Total profit from financial operations before provision for credit losses as a percentage of average interest-earning assets.

(3)	The difference between the average yield on total interest-earning assets and the average yield on interest-bearing liabilities.

Return on Equity and Assets

The following tables present our selected financial ratios for the periods indicated.

	IFRS
	For the six months ended June 30,						For the year ended December 31,
	2009			2008			2008			2007

ROA: Return on average total assets(1)		1.7	%		1.3	%		1.5	%		1.9	%
ROE: Return on average shareholders’ equity(1)		9.9	%		14.8	%		10.3	%		18.1	%
Average shareholders’ equity as a percentage of average total assets(1)		17.6	%		9.4	%		14.1	%		10.5	%
Payout(2)		25.6	%		—			35.8	%		66.2	%

(1)	Figures for the six months ended June 30, 2009 and 2008 are presented on an annualized basis by doubling six months earnings component. Annualized figures are not necessarily indicative of the figures that would result for the entire year.

(2)	Dividend payout ratio (dividends declared per share divided by net income per share).

	Brazilian GAAP For the year ended December 31, 2006
ROA: Return on average total assets		1.3	%
ROE: Return on average stockholders’ equity		15.5	%
Average stockholders’ equity as a percentage of average total assets		8.5	%

Dividend payout ratio for the year ended December 31, 2006 has not been provided because our predecessor banks were reorganized in 2006. See “Presentation of Financial and Other Information”.

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Interest-Earning Assets

The following table shows the percentage mix of our average interest-earning assets for the years indicated. You should read this table in light of our observations noted in “—Average Balance Sheet and Interest Rates”.

	IFRS
	For the six months ended June 30,						For the year ended December 31,
	2009			2008			2008			2007
Cash and due from central banks		7.7	%		18.9	%		14.6	%		18.8	%
Due from credit entities		13.5	%		13.0	%		13.3	%		10.5	%
Loans and credits		61.1	%		49.6	%		54.9	%		47.8	%
Debt securities		17.7	%		18.5	%		17.2			22.9	%
Total interest-earning assets		100.0	%		100.0	%		100.0	%		100.0	%

	Brazilian GAAP For the year ended December 31, 2006
Lending operations		38.5	%
Leasing operations		0.6	%
Interbank investments, securities transactions and derivative financial instruments		55.0	%
Foreign exchange operations		1.6	%
Compulsory investments		4.3	%
Total interest-earning assets		100.0	%

Loans and Advances to Credit Institutions

The following tables show our short-term funds deposited with other banks at each of the dates indicated.

	IFRS
	At June 30,				At December 31,
	2009		2008		2008		2007
	(in millions of R$)
Time deposits		12,351		2,484		10,703		1,861
Reverse repurchase agreements		9,213		7,866		4,583		739
Other accounts(1)		15,056		6,756		18,453		4,684
Total		36,620		17,106		33,739		7,284

(1)	Includes primarily foreign currency investments and escrow deposits.

	Brazilian GAAP At December 31, 2006
	(in millions of R$)
Money market investments		3,269
Interbank deposits		1,184
Foreign currency investments		856
Total		5,309

Investment Securities

At June 30, 2009 and December 31, 2008, the book value of our investment securities was R$40.9 billion and R$41.5 billion, respectively, (representing 14.2% of our total assets at such dates). R$35.2 billion, or 86.1%, and R$37.5 billion, or 89.9%, of our investment securities at June 30, 2009 and December 31, 2008, respectively,

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consisted of Brazilian Government and government agency securities. For a discussion of how we value our investment securities, see notes 6 and 7 to our financial statements.

The following tables show the book values of our investment securities by type and domicile of counterparty at each of the dates indicated.

	IFRS
	At June 30,						At December 31,
	2009			2008			2008			2007
	(in millions of R$)
Debt securities
Brazilian government securities		35,198			15,486			37,493			14,338
Other domestic issuers		3,862			1,595			2,132			1,092
Total domestic		39,060			17,081			39,625			15,430
Less-allowance for credit losses		(29	)		(14	)		(29	)		(14	)
Total debt securities		39,031			17,067			39,596			15,416
Equity securities
Equity securities		1,963			1,994			1,923			2,959
Less-price fluctuation allowance		(111	)		(16	)		–			–
Total equity securities		1,852			1,978			1,923			2,959
Total investment securities		40,883			19,045			41,520			18,374

	Brazilian GAAP At December 31, 2006
	(in millions of R$)
Debt securities
Brazilian government securities		34,843
Other domestic issuer		1,494
Total debt securities		36,337
Equity securities
Equity securities		2,120
Total equity securities		2,120
Total investment securities		38,457

At June 30, 2009 and December 31, 2008 and 2007, we held no securities of single issuers, other than the Brazilian government securities, which exceeded 10% of our shareholders’ equity (and other debt securities with aggregate values near to 10% of our shareholders’ equity). Brazilian government securities represented 68.6%, 75.2% and 140.5% of our shareholders’ equity at June 30, 2009 and December 31, 2008 and 2007, respectively.

The following tables analyze the maturities and weighted average yields of our debt investment securities (before impairment allowances) at June 30, 2009 and December 31, 2008. Yields on tax-exempt obligations have not been calculated on a tax-equivalent basis because we do not believe the effect of such a calculation would be material.

	IFRS At June 30, 2009
	Maturing within 1 year		Maturing between 1 and 5 years		Maturing between 5 and 10 years		Maturing after 10 years		Total		Average Yield
	(in millions of R$)
Debt Securities
Brazilian government		14,268		16,311		2,961		1,658		35,198		11.0	%
Other domestic issuers		1,835		1,318		644		65		3,862		10.5	%
Total debt investment securities		16,103		17,629		3,605		1,723		39,060		10.9	%

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	IFRS At December 31, 2008
	Maturing within 1 year		Maturing between 1 and 5 years		Maturing between 5 and 10 years		Maturing after 10 years		Total		Average Yield
	(in millions of R$)
Debt Securities
Brazilian government		8,975		23,339		3,247		1,932		37,493		10.9	%
Other domestic issuers		346		1,611		175		—		2,132		11.6	%
Total debt investment securities		9,321		24,950		3,422		1,932		39,625		10.9	%

Loan Portfolio

At June 30, 2009 and December 31, 2008, our total loans and advances to customers equaled R$140.0 billion and R$142.6 billion, respectively, (48.5% of our total assets at such dates). Net of allowances for credit losses, loans and advances to customers equaled R$130.8 billion and R$134.5 billion at June 30, 2009 and December 31, 2008, respectively, (45.3% and 45.7% of our total assets at June 30, 2009 and December 31, 2008, respectively). In addition to loans, we had outstanding at June 30, 2009 and December 31, 2008 and 2007, R$70.4 billion, R$66.0 billion and R$19.6 billion, respectively, of undrawn balances available to third parties.

Types of Loans by Type of Customer

Substantially all of our loans are to borrowers domiciled in Brazil and are denominated in reais. The following tables analyze our loans and advances to customers (including securities purchased under agreements to resell), by type of customer loan, at each of the dates indicated. For each category of loan, we maintain specific risk management policies in line with the standards of the Santander Group and as managed and monitored by our board of directors through the risk committee. Our credit approval processes for each category of loan are structured primarily around our business segments. See “Operating and Financial Review and Prospects—Risk Management—Credit Risk” for details on our credit approval policies for retail and wholesale lending.

The Bank has a diversified loan portfolio with no concentration exceeding 10% of total loans.

	IFRS
	At June 30,						At December 31,
	2009			2008			2008			2007
	(in millions of R$)
Commercial, financial and industrial(1)		74,299			28,186			76,407			32,879
Real estate-construction(2)		3,194			331			2,469			301
Real estate-mortgage(3)		4,770			1,914			4,472			1,692
Installment loans to individuals(4)		44,959			16,897			46,857			16,178
Lease financing(5)		12,739			625			12,444			402
Total loans and leases, gross(6)		139,961			47,953			142,649			51,452
Allowance for possible loan losses		(9,159	)		(2,451	)		(8,181	)		(2,249	)
Loans and leases, net of allowances		130,802			45,502			134,468			49,203

(1)	Includes primarily loans to small and medium-sized businesses, or SMEs, in our Commerical Banking segment, and to Global Banking & Markets, or GB&M, corporate and business enterprise customers in our Wholesale

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Global Banking segment. The principal products offered to SMEs in this category include revolving loans, overdraft facilities, installment loans, working capital and equipment finance loans. Credit approval for SMEs is based on customer income, business activity, collateral coverage and internal and external credit scoring tools. Collateral on commercial, financial and industrial lending to SMEs generally includes receivables, liens, pledges, guarantees and mortgages, with coverage generally ranging from 100% to 150% of the loan value depending on the risk profile of the loan. Our Wholesale Global Banking customers are offered a range of loan products ranging from typical corporate banking products (installment loans, working capital and equipment finance loans) to more sophisticated products (derivative and capital markets transactions). As Wholesale Global Banking customers tend to be larger businesses, credit approval is based on customer credit quality as evaluated by a specialized teams of risk analysts taking account of, among other things, business revenues and credit history of each customer. Underwriting policies for this category of loans to our Wholesale Global Banking customers are focused on the type of guarantee or collateral provided. Certain loans (BNDES products) are generally secured by liens on financed machinery and equipment, though guarantees may also be provided as additional security.

(2)

Includes construction loans made, principally to real estate developers that are SMEs and corporate customers in our Wholesale Global Banking Segment. Credit approval is carried out by a specialized team of risk analysts which follows a specific set of underwriting standards and analysis of each customer based on, among other things, business revenues and credit history. Loans in this category are generally secured by mortgages and receivables, though guarantees may also be provided as additional security.

(3)

Includes loans on residential real estate to individuals. Credit approval policies in this category are determined by reference to the type of lending product being offered, the type and location of the real estate, the revenue or income of the business or customer, respectively, requesting the loan and internal and external credit scoring information. All loans granted under this category are secured by the financed real estate. Loan to value ratios for loans in this category are generally limited to 80% and the average loan to value ratio for new loans is approximately between 50% and 60%.

(4)

Consists primarily of unsecured personal installment loans (including loans, the payments for which are automatically deducted from a customer’s payroll), revolving loans, overdraft facilities, consumer finance facilities and credit cards. Credit approval in this category is based on individual income, debt to income ratio and internal and external credit scoring models. Credit approval for many of these types of loans is based on automatic scoring models, with pre-set lending limits based on credit scores. For example, the maximum lending amount on revolving loans and overdraft facilities may vary from between 50% and 250% of an individual’s monthly income, depending on the specific product and credit score of the individual.

(5)

Includes primarily automobile leases and loans to individuals. Credit approval is based both on an automatic scoring model using external credit scores and on evaluation by our branch personnel following our risk management policies. The vehicle financed acts as collateral for the particular loan granted.

(6)	Includes the debit balances (financial assets) of all the credit and loans granted by the Bank, including money market operations through central counterparties, except for credit of any nature in the name of credit institutions or those represented by securities.

	Brazilian GAAP At December 31,
	2006			2005			2004
	(in millions of R$)
Commercial, financial and industrial		23,571			18,186			13,575
Real estate		1,232			1,009			842
Installment loans to individuals		12,303			9,297			6,732
Lease financing		403			490			444
Total loans and leases, gross(1)		37,509			28,982			21,593
Allowance for possible loan losses		(1,622	)		(1,197	)		(916	)
Loans and leases, net of allowances		35,887			27,785			20,677

(1)	Includes all loans granted by the Bank, considered as credit portfolio under Central Bank Resolution No. 2,682. Certain assets accounted for as loans under IFRS are not so accounted under Brazilian GAAP.

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Maturity

The following tables set forth an analysis by maturity of our loans and advances to customers by type of loan at June 30, 2009 and December 31, 2008.

	IFRS Maturity at June 30, 2009
	Less than one year					One to five years					Over five years					Total
	Balance		% of Total			Balance		% of Total			Balance		% of Total			Balance		% of Total
	(in millions of R$, except percentages)
Commercial, financial and industrial		52,570		57.6	%		19,688		44.7	%		2,041		44.2	%		74,299		53.0	%
Real estate		2,977		3.2	%		2,669		6.1	%		2,318		50.2	%		7,964		5.7	%
Installment loans to individuals		30,272		33.2	%		14,441		32.8	%		247		5.4	%		44,960		32.1	%
Lease financing		5,484		6.0	%		7,246		16.4	%		9		0.2	%		12,739		9.1	%
Total loans and leases, gross		91,303		100.0	%		44,044		100.0	%		4,615		100.0	%		139,962		100.0	%

	IFRS Maturity at December 31, 2008
	Less than one year					One to five years					Over five years					Total
	Balance		% of Total			Balance		% of Total			Balance		% of Total			Balance		% of Total
	(in millions of R$, except percentages)
Commercial, financial and industrial		52,276		60.1	%		21,663		44.4	%		2,468		35.8	%		76,407		53.6	%
Real estate		2,216		2.6	%		2,581		5.3	%		2,140		31.0	%		6,937		4.9	%
Installment loans to individuals		27,464		31.6	%		17,155		35.1	%		2,242		32.5	%		46,862		32.9	%
Lease financing		4,992		5.7	%		7,401		15.2	%		51		0.7	%		12,444		8.7	%
Total loans and leases, gross		86,948		100.0	%		48,800		100.0	%		6,901		100.0	%		142,649		100.0	%

Fixed and Variable Rate Loans

The following table sets forth a breakdown of our fixed and variable rate loans having a maturity of more than one year at June 30, 2009 and December 31, 2008.

	IFRS
	At June 30, 2009		At December 31, 2008
	(in millions of R$)

Fixed rate		29,298		38,910
Variable rate		19,361		16,792
Total		48,659		55,702

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Cross-Border Outstandings

The following table sets forth, at the dates indicated, the aggregate amount of our cross-border outstandings (which consist of loans, interest-bearing deposits with other banks, acceptances and other monetary assets denominated in a currency other than the home-country currency of the office where the item is booked) where outstandings in the borrower’s country exceeded 0.75% of our total assets. Cross-border outstandings do not include local currency loans made by subsidiary banks in other countries to the extent that such loans are funded in the local currency or hedged. As a result, they do not include the majority of the loans by our Cayman branch, which are fully hedged.

	IFRS
	At June 30,					At December 31,
	2009					2008					2007
	Balance		% of Total Assets			Balance		% of Total Assets			Balance		% of Total Assets
	(in millions of R$, except percentages)
OECD countries(1)
Austria		557		0.19	%		4,937		1.68	%		—		0.0	%
Spain		1,123		0.39	%		3,734		1.27	%		1,630		1.51	%
United States		2,780		0.96	%		1,288		0.44	%		273		0.25	%
Other OECD countries(2)		1,847		0.64	%		1,495		0.50	%		577		0.53	%
Total OECD		6,306		2.18	%		11,454		3.89	%		2,481		2.29	%

Non-OECD countries
Latin American countries(2)		127		0.04	%		147		0.05	%		264		0.24	%
Other(2)		1,792		0.62	%		2,182		0.74	%		388		0.36	%
Total non-OECD		1,919		0.66	%		2,329		0.79	%		652		0.60	%
Total		8,225		2.84	%		13,784		4.68	%		3,132		2.89	%

(1)	The Organization for Economic Cooperation and Development.

(2)	Aggregate outstandings in any single country in this category do not exceed 0.75% of our total assets.

The following table sets forth the amounts of our cross-border outstandings at December 31, 2008 and 2007 by type of borrower where outstandings in the borrower’s country exceeded 0.75% of total assets.

	IFRS
	Government		Banks and Other Financial Institutions		Commercial and Industrial		Total
	(in millions of R$)
2007
Spain		—		1,625		5		1,630
Total		—		1,625		5		1,630

2008
Austria		401		—		4,535		4,937
Spain		—		3,731		4		3,734
Total		401		3,731		4,539		8,671

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Movements in Allowances for Credit Losses

The following tables analyze movements in our allowances for credit losses for the periods indicated. For further discussion of movements in the allowances for credit losses, see “Operating and Financial Review and Prospects—Results of Operations— Results of Operations for the Six Months Ended June 30, 2009 Compared to the Six Months Ended June 30, 2008—Impairment Losses on Financial Assets (Net)” and “Operating and Financial Review and Prospects—Results of Operations—Results of Operations for the Year Ended December 31, 2008 Compared to the Year Ended December 31, 2007—Impairment Losses on Financial Assets (Net)”.

	IFRS
	For the six months ended June 30,						For the year ended December 31,
	2009			2008			2008			2007
	(in millions of R$)
Balance beginning of period		8,181			2,249			2,249			2,170
Acquired companies		—			—			4,717			—
Net additions		5,144			1,590			4,533			2,474
Charge offs		(4,166	)		(1,388	)		(3,318	)		(2,395	)
Balance end of period		9,159			2,451			8,181			2,249

	Brazilian GAAP Year Ended December 31,
	2006			2005			2004
	(in millions of R$)
Balance beginning of period		1,197			916			1,009
Net additions		1,522			817			475
Charge offs		(1,097	)		(539	)		(567	)
Other		—			3			(1	)
Balance end of period		1,622			1,197			916

The tables below show a breakdown of recoveries, net provisions and charge-offs against credit loss allowance by type and domicile of borrower for the periods indicated.

	IFRS
	For the six months ended June 30,						For the year ended December 31,
	2009			2008			2008		2007
	(in millions of R$)
Recoveries of loans previously charged off(1)		318			92			430		294
Commercial, financial and industrial		75			20			144		101
Real estate – mortgage		24			7			29		11
Installment loans to individuals		211			61			246		163
Lease finance		8			4			11		19
Acquired companies		—			—			4,717		—
Commercial, financial and industrial		—			—			1,988		—
Real estate – mortgage		—			—			48		—
Installment loans to individuals		—			—			2,610		—
Lease finance		—			—			71		—
Net provisions for credit losses(1)		5,144			1,590			4,533		2,474
Commercial, financial and industrial		842			176			1,452		261
Real estate – mortgage		(7	)		(9	)		26		6
Installment loans to individuals		4,194			1,386			2,951		2,180
Lease finance		115			37			104		27

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	IFRS
	For the six months ended June 30,						For the year ended December 31,
	2009			2008			2008			2007
	(in millions of R$)
Charge-offs against credit loss allowance		(4,166	)		(1,389	)		(3,319	)		(2,394	)
Commercial, financial and industrial		(1,059	)		(271	)		(739	)		(310	)
Real estate – mortgage		(16	)		(5	)		(13	)		(7	)
Installment loans to individuals		(3,026	)		(1,083	)		(2,513	)		(2,027	)
Lease finance		(65	)		(30	)		(54	)		(50	)

(1)	Impairment losses on financial assets, net, as reported in our consolidated financial statements, reflects net provisions for credit losses less recoveries of loans previously charged off.

	Brazilian GAAP For the year ended December 31, 2006
	2006			2005			2004
	(in millions of R$)
Recoveries of loans previously charged off		355			210			312
Commercial, financial and industrial		147			74			215
Real estate-mortgage		15			9			4
Installment loans to individuals		175			111			75
Lease finance		18			16			18
Acquired companies		—			—			—
Commercial, financial and industrial		—			—			—
Real estate-mortgage		—			—			—
Installment loans to individuals		—			—			—
Lease finance		—			—			—
Net provisions for credit losses		1,522			817			475
Commercial, financial and industrial		376			162			134
Real estate-mortgage		13			(5	)		9
Installment loans to individuals		1,087			635			309
Lease finance		46			25			23
Charge offs against credit loss allowance		(1,097	)		(539	)		(567	)
Commercial, financial and industrial		(227	)		(145	)		(284	)
Real estate-mortgage		(13	)		(7	)		(7	)
Installment loans to individuals		(833	)		(362	)		(255	)
Lease finance		(25	)		(24	)		(21	)

The tables below show a breakdown of allowances for credit losses by type of borrowers and the percentage of loans in each category as a share of total loans at the date indicated.

	IFRS
	At June 30,										At December 31,
	2009		% of total loans			2008		% of total loans			2008		% of total loans			2007		% of total loans
	(in millions of R$, except percentages)
Borrowers
Commercial and industrial		3,170		55.4	%		592		59.5	%		3,387		55.3	%		686		64.5	%
Mortgage loans		71		3.4	%		19		4.0	%		94		3.14	%		33		3.3	%
Installment loans to individuals		5,683		32.1	%		1,770		35.2	%		4,515		32.9	%		1,467		3.4	%
Lease financing		235		9.1	%		70		1.3	%		185		8.7	%		63		0.8	%
Total		9,159		100.0	%		2,451		100.0	%		8,181		100.0	%		2,249		100.0	%

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	Brazilian GAAP Year Ended December 31,
	2006		% of total loans			2005		% of total loans			2004		% of total loans
	(in millions of R$, except percentages)
Borrowers
Commercial and industrial		432		62.8	%		282		62.8	%		267		62.9	%
Mortgage loans		20		3.3	%		20		3.5	%		32		3.9	%
Installment loans to individuals		1,102		32.8	%		848		32.1	%		571		31.2	%
Lease financing		68		1.0	%		47		1.7	%		46		2.1	%
Total		1,622		100.0	%		1,197		100.0	%		916		100.0	%

Impaired Assets

The following tables show our impaired assets, excluding country-risk.

	IFRS
	At June 30,						At December 31,
	2009			2008			2008			2007
	(in millions of R$, except percentages)
Non-performing assets
Past-due and other non-performing assets(1)		9,431			2,184			7,730			2,093
Non-performing loans as a percentage of total loans		6.7	%		4.6	%		5.4	%		4.1	%
Net loan charge-offs as a percentage of total loans		3.0	%		2.9	%		2.3	%		4.7	%

(1)

Includes at June 30, 2009, R$391 million of doubtful loans and at December 31, 2008, R$1,260 million of doubtful loans that were not past-due and therefore were accounted for on an accrual basis. In the six months ended June 30, 2009, the amount of interest owed on non-accruing assets that would have been recorded had such assets accrued interest from January 1, 2009 would have been R$982 million. In 2008, the amount of interest on non-accruing assets that would have been recorded had such assets accrued interest from January 1, 2008 would have been R$658 million. No loan that was more than 60 days past due was accounted for on an accrual basis.

	Brazilian GAAP At December 31,
	2006			2005			2004
	(in millions of R$)
Non-performing assets
Past-due and other non-performing assets		1,796			1,225			951
Non-performing loans as a percentage of total loans		4.8	%		4.2	%		4.4	%
Net loan charge-offs as a percentage of total loans		2.9	%		1.9	%		2.6	%

Evolution of Impaired Assets

The following tables show the movement in our impaired assets (excluding country risk).

	IFRS
	At June 30,						At December 31,
	2009			2008			2008			2007
	(in millions of R$)
Opening balance		7,730			2,093			2,093			2,010
Net additions		5,866			1,465			8,956			2,478
Writeoffs		(4,165	)		(1,389	)		(3,319	)		(2,395	)
Closing balance		9,431			2,169			7,730			2,093

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	IFRS
	For the quarter ended
	Mar. 31, 2008			Jun. 30, 2008			Sep. 30, 2008			Dec. 31, 2008			Mar. 31, 2009		Jun. 30, 2009
	(in millions of R$)
Opening balance		2,093			2,549			2,169			6,588		7,730		8,287
Net additions		672			622			5,071			2,591		2,110		3,756
Writeoffs		(216	)		(1,002	)		(653	)		(1,449	)	(1,553	)	(2,612	)
Closing balance		2,549			2,169			6,588			7,730		8,287		9,431

	Brazilian GAAP For the year ended December 31,
	2006			2005			2004
	(in millions of R$)
Opening balance		1,225			951			1,066
Net additions		1,668			813			452
Writeoffs		(1,097	)		(539	)		(567	)
Closing balance		1,796			1,225			951

Deteriorating economic conditions resulted in an accelerated increase in non-performing assets in the third and fourth quarters of 2008. Although the effects of the global financial markets crisis in Brazil have been moderate compared to those in the United States and Europe, Brazil also suffered from a decline in liquidity and exchange rate losses which has led to decreases in revenue among our SME and Global Wholesale Banking customers due to decreased demand in the international markets. This has contributed to increased rates of default, particularly from our small and medium-sized corporate borrowers since the fourth quarter of 2008, and resulted in an increase in unemployment in the fourth quarter of 2008 with job destruction in the last months of the year that had a negative impact on the performance of the retail credit business as individual borrowers experienced higher rates of default.

Non-performing assets also increased as a result of the acquisition of Banco Real in August 2008. With the integration of Banco Real and organic growth, we increased our loans and receivables from R$55.0 billion as of December 31, 2007 to R$162.7 billion as of December 31, 2008. At the same time, non-performing assets increased by R$3,281 million or 58% in 2008 due to the acquisition of Banco Real. For the year ended December 31, 2008, impairment losses on financial assets (net) were R$4,100 million, of which R$1,236 million were contributed by Banco Real in the period from August 29, 2008 to December 31, 2008. See “Operating and Financial Review and Prospects—Acquisition of Banco Real” for a more detailed discussion of the effects of this acquisition and “Operating Financial Review and Prospects—Results of Operations for the Six Months Ended June 30, 2009 Compared to the Six Months Ended June 30, 2008—Impairment Losses On Financial Assets (Net)” and “Operating and Financial Review and Prospects—Results of Operations for the Year Ended December 31, 2008 Compared to the Year Ended December 31, 2007— Impairment Losses on Financial Assets (Net) for a period-on-period discussion of affects on net income due to non-performing assets. Non-performing assets increased by R$1.7 billion or 22% in the first six months of 2009 reflecting continuing deterioration in the economic environment.

In response to the global financial markets crisis, we have adjusted our policies and strategy to maintain appropriate risk levels within the Santander Group risk management profile, with individualized policies and strategy for each business segment. The principal adjustments were to increase the resources of the collections function, adding positions for collections in the call center and increasing the incentives for collections, particularly in branches with poor credit performance. In the credit approval process, we raised the minimum score for pre-approved credit limits in those customer categories experiencing a higher rate of increase of non-performing assets.

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The following table sets forth our non-performing assets by type of loan for each of the dates indicated.

	IFRS
	At June 30,		At December 31,
	2009		2008		2007
	(in millions of R$)
Impaired assets
Commercial, financial and industrial		3,729		2,730		502
Real estate – mortgage		83		74		23
Installment loans to individuals		5,364		4,528		1,558
Lease financing		255		398		10
Total		9,431		7,730		2,093

Impaired Asset Ratios

The following tables show the ratio of our impaired assets to total computable credit risk and our coverage ratio at the dates indicated.

	IFRS
	At June 30,						At December 31,
	2009			2008			2008			2007
	(in millions of R$, except percentages)
Computable credit risk(1)		162,937			66,682			164,695			64,558
Non-performing assets		9,431			2,184			7,730			2,093
Allowances for credit losses		9,159			2,451			8,181			2,249
Ratios
Non-performing assets to computable credit risk		5.8	%		3.3	%		4.7	%		3.2	%
Coverage ratio(2)		97.1	%		112.2	%		105.8	%		107.5	%

(1)	Computable credit risk is the sum of the face amounts of loans and leases (including non-performing assets), guarantees and documentary credits.

(2)	Allowances for credit losses as a percentage of non-performing assets.

	Brazilian GAAP At December 31,
	2006			2005			2004
	(in millions of R$)
Computable credit risk(1)		37,509			28,982			21,593
Non-performing assets		1,796			1,225			951
Allowances for credit losses		1,622			1,197			916
Ratios
Non-performing assets to computable credit risk		4.8	%		4.2	%		4.4	%
Coverage ratio(2)		90.3	%		97.7	%		96.4	%

(1)	Computable credit risk is the sum of the face amounts of loans and leases (including non-performing assets but excluding country risk loans), guarantees and documentary credits.

(2)	Allowances for non-performing assets as a percentage of non-performing assets.

Foreclosed Assets

The following tables show the movements in our foreclosed assets at the dates indicated.

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	IFRS
	At June 30,						At December 31,
	2009			2008			2008			2007
	(in millions of R$, except percentages)
Opening balance		291			193			193			207
Foreclosures		45			25			167			73
Sales		(51	)		(28	)		(166	)		(87	)
Acquired companies		—			—			97			—
Gross foreclosed assets		285			190			291			193
Allowances established		(227	)		(159	)		(178	)		(161	)
Allowance as a percentage of foreclosed assets		79.6	%		84.1	%		61.2	%		83.4	%
Closing balance (net)		58			30			113			32

	Brazilian GAAP At December 31, 2006
	(in millions of R$, except percentages)
Opening balance		212
Foreclosures		102
Sales		(107	)
Gross foreclosed assets		207
Allowances established		(175	)
Allowance as a percentage of foreclosed assets		84.5	%
Closing balance (net)		32

Liabilities

Deposits

The principal components of our deposits are customer demand, time and notice deposits, and international and domestic interbank deposits. Our retail customers are the principal source of our demand, time and notice deposits.

The following tables analyze our deposits at the dates indicated.

	IFRS
	At June 30,				At December 31,
	2009		2008		2008		2007
	(in millions of R$)
Deposits from central banks and credit institutions
Time deposits		22,922		11,857		26,721		11,949
Other demand accounts		101		45		66		61
Repurchase agreements		3		5,060		31		6,834
Total		23,026		16,962		26,818		18,844
Customer deposits
Current accounts		14,120		4,372		15,298		6,588
Savings accounts		21,411		7,223		20,643		6,288
Other demand deposits		—		—		—		26
Time deposits
Fixed-term deposits		47,862		1,427		52,465		1,365
Discount deposits		39,602		33,696		36,415		24,663
Repurchase agreements		31,927		12,643		30,674		16,281
Total		154,922		59,361		155,495		55,211
Total deposits		177,948		76,322		182,313		74,055

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	Brazilian GAAP At December 31, 2006
Deposits from central bank and financial institutions
Interbank deposits		251
Securities sold under repurchase agreements		25,475
Borrowings and onlendings		9,961
Domestic onlendings		3,992
Foreign borrowings		5,969
Total		35,687
Customer deposits
Demand deposits		4,731
Savings deposits		5,061
Time deposits		21,432
Other deposits		317
Total		31,541
Total deposits		67,228

The following tables show the maturity of time deposits (excluding inter-bank deposits) in denominations of $100,000 or more at the dates indicated. Large denomination customer deposits may be a less stable source of funds than demand and savings deposits.

	IFRS
	At June 30, 2009				At December 31, 2008
	Domestic		International		Domestic		International
	(in millions of R$)
Under 3 months		6,978		1,414		8,472		2,231
3 to 6 months		7,579		7		4,324		351
6 to 12 months		18,846		—		18,752		195
Over 12 months		30,054		—		36,152		2
Total		63,457		1,421		67,700		2,779

Short-Term Borrowings

The following tables show our short-term borrowings consisting of Brazilian government securities that we sold under agreements to repurchase for purpose of funding our operations.

	IFRS At June 30,
	2009					2008
	Amount		Average Rate			Amount		Average Rate
	(in millions of R$, except percentages)
Securities sold under agreements to repurchase (principally Brazilian government securities)
At June 30		31,930		8.2	%		17,703		11.3	%
Average during period		32,070		11.8	%		15,796		9.7	%
Maximum month-end balance		34,584		—			17,699		—
Total short-term borrowings at period-end		31,930					17,703

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	IFRS At December 31,
	2008					2007
	Amount		Average Rate			Amount		Average Rate
	(in millions of R$, except percentages)
Securities sold under agreements to repurchase (principally Brazilian government securities)
At December 31		30,706		13.6	%		23,115		11.2	%
Average during year		19,639		12.0	%		21,567		11.0	%
Maximum month-end balance		31,058					25,748
Total short-term borrowings at year-end		30,706					23,115

	Brazilian GAAP At December 31, 2006
	Amount		Average Rate
	(in millions of R$, except percentages)
Securities sold under agreements to repurchase (principally Brazilian government securities):
At December 31		25,475
Average during year		20,080		13.8	%
Maximum month-end balance		30,838
Total short-term borrowings at year-end		25,475

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OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements as of and for the years ended December 31, 2008 and 2007 and as of and for the six months ended June 30, 2009 and 2008 and the related notes thereto, and with the financial information presented under the section entitled “Selected Financial and Operating Data” included elsewhere in this prospectus. The preparation of the financial statements referred to in this section required the adoption of assumptions and estimates that affect the amounts recorded as assets, liabilities, revenue and expenses in the years and periods addressed and are subject to certain risks and uncertainties. Our future results may vary substantially from those indicated as a result of various factors that affect our business, including, among others, those mentioned in the sections “Forward-Looking Statements” and “Risk Factors”, and other factors discussed elsewhere in this prospectus. Our financial statements as of and for the years ended December 31, 2008 and 2007, together with the report of our independent registered public accounting firm, and as of and for the six months ended June 30, 2009 and 2008 included in this prospectus have been prepared in accordance with IFRS. Our results of operations for periods ended December 31, 2008 and thereafter are not comparable to the respective periods prior to that date because of the consolidation of Banco Real as from August 30, 2008. See “—Acquisition of Banco Real”.

Overview

We operate our business along three segments, Commercial Banking, Global Wholesale Banking and Asset Management and insurance. Through our Commercial Banking segment, we offer traditional banking services, including checking and saving accounts, home and automobile financing, unsecured consumer financing, checking account overdraft loans, credit cards and payroll loans to mid and high income individuals and corporations (other than to our GB&M clients). Our Global Wholesale Banking segment provides sophisticated and structured financial services and solutions to a group of approximately 700 large local and multinational conglomerates, offering such products as global transaction banking, syndicated lending, corporate finance, equity and treasury. Through our Asset Management and Insurance segment we manage fixed income, money market, equity and multi-market funds and offer insurance products complementary to our core banking business to our retail and small and medium-sized corporate customers.

Effects of the Global Financial Markets Crisis on our Financial Condition and Results of Operations

The global financial markets crisis has significantly affected the world economy since the second half of 2008. It has led to recessions and increasing unemployment in the world’s leading economies, a reduction in investments on a global scale, a decrease in raw material prices and a sharp decline in credit availability and liquidity, as well as a general closure of the capital markets worldwide. A number of major financial institutions, including some of the largest global commercial banks, investment banks, mortgage lenders, mortgage guarantors and insurance companies, are experiencing significant difficulties. In the last year, there have been runs on deposits at several financial institutions and numerous institutions have sought additional capital. Central banks around the world have coordinated efforts to increase liquidity in the financial markets by taking measures such as increasing the amounts they lend directly to financial institutions, lowering interest rates and significantly increasing temporary reciprocal currency arrangements. In an attempt to prevent the failure of the financial system, governments throughout the world have intervened on an unprecedented scale. They have taken equity stakes in financial institutions, announced programs to guarantee certain debt of financial institutions, increased consumer deposit guarantees and brokered the acquisitions of certain struggling financial institutions, among other measures.

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The effects of the global financial markets crisis in Brazil have been moderate compared to those in the United States and Europe. Brazilian GDP grew an estimated 5.1% in 2008, although growth decelerated in the fourth quarter, and large Brazilian financial institutions have not been significantly affected by the crisis. A number of smaller and mid-size banks suffered from a lack of liquidity, but the Brazilian financial system as a whole did not suffer the same impact as the U.S. and European financial systems. While some export-oriented companies in the raw material and certain other industries have suffered revenue decreases due to decreased demand in the international markets, relatively strong internal demand has helped to reduce the impact of the global crisis on the Brazilian industry. Only approximately 12.9% and 12.6% of Brazilian GDP was derived from exports in the years of 2008 and 2007, respectively. Brazilian banks are funded almost entirely by domestic deposits, which have increased during the financial crisis as funds were moved from asset management vehicles into bank deposits, which are perceived to be safer. In addition, according to our estimates based on Central Bank data, at June 30, 2009, only approximately 35% of funding in the Brazilian banking sector was from outside the country. As a result, the global liquidity crisis had relatively little impact in Brazil. In addition, the credit default swap market in Brazil is still in its incipient stages and Brazilian banks may only acquire overseas credit default swaps through their non-Brazilian branches.

To date, the principal effects of the crisis on our business have been the following:

·	Increased provisioning for loan losses due to expectations of increased rates of default, particularly from our small and medium-sized corporate borrowers since the fourth quarter of 2008.

·	An increase in the cost of domestic funding resulting mainly from the unavailability of external funding.

·	A decrease in the rate of growth of credit volumes, particularly among individual borrowers, although borrowing by individuals increased in the first half of 2009.

The global financial crisis has not had a material impact on our liquidity and capital resources due to the relatively stable economic environment in Brazil, our relatively low dependence on funding from the international markets, the strict compulsory deposit requirements of the Central Bank and a relatively large liquidity cushion we built up in response to the global financial crisis. We gauge liquidity needs on a recurring basis based on our business plans and we pursue funding actions based on anticipated funding needs. At December 31, 2008 and June 30, 2009, our Basel capital adequacy ratio as measured by the Central Bank criteria, which excludes goodwill, was 14.7% and 17.0%, respectively. Our securities portfolio consists mainly of Brazilian government fixed income securities, and therefore we did not have a high level of exposure to the downturn in the worldwide equity markets in 2008 and the first quarter of 2009.

Acquisition of Banco Real

On August 29, 2008, the Santander Group made a capital contribution to us of its shares of Banco Real and the minority shareholders of Banco Real exchanged their shares of Banco Real for shares of Santander Brasil (incorporação de ações). As a result, Banco Real became our wholly-owned subsidiary. Our acquisition of Banco Real roughly doubled our size in terms of total assets. Principally as a result of the acquisition, the number of our active current account holders increased from 3.5 million to more than 8 million from June 30, 2008 to December 31, 2008, and in the same period, our distribution network increased from 1,546 branches and service site units to 3,603 branches and service site units. At December 31, 2007, Banco Real had total assets of R$112.8 billion and shareholders’ equity of R$13.2 billion. With the integration of Banco Real and organic growth, we increased our loans and receivables from R$55.0 billion as of December 31, 2007 to R$162.7 billion as of December 31, 2008, and our total deposits increased from R$74.1 billion as of December 31, 2007 to R$182.3 billion as of December 31, 2008.

As a consequence of this acquisition, one of the key factors to be considered when analyzing our financial condition and results of operations as of and for the years ended December 31, 2008 and 2007 and the six months ended June 30, 2009 and 2008 is the consolidation of the entities of Banco Real in our financial statements since August 30, 2008. As a result, our results of operations for 2008 are not comparable to those of 2007 and our results of operations for the first six months of 2009 are not comparable to the same period in 2008. In order to analyze the organic developments in our business obscured by the effect of the Banco Real acquisition, management uses and

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we present in this prospectus pro forma information for the first six months of 2008 as if we had consolidated Banco Real as from January 1, 2008. For a complete presentation of this pro forma information, see “Unaudited Pro Forma Consolidated Financial Information”.

In addition, to provide meaningful disclosure with respect to our results of operations for the year ended December 31, 2008, management uses and we present, in addition to our audited results of operations for that period, certain full year 2008 financial information excluding the results of Banco Real. Banco Real was our wholly-owned subsidiary during the last four months of 2008 and this presentation is intended only to subtract from our reported results for 2008 the amounts contributed by Banco Real. This information does not purport to represent what our results of operations would have been had we not acquired Banco Real. We have not adjusted our reported results for any expenses incurred in 2008 in connection with the acquisition of Banco Real or for any revenue synergies. Management believes that any such additional expense or revenue was not material. The following table shows our results of operations for the year ended December 31, 2008, the amounts contributed by Banco Real in that period, and our reported results less amounts contributed by Banco Real.

	For the year ended December 31, 2008
	As reported less Banco Real			Banco Real			As reported
	(in millions of R$)
Interest and similar income		14,694			9,074			23,768
Interest expense and similar charges		(8.023	)		(4,307	)		(12,330	)
Net interest income		6,671			4,767			11,438
Income from equity instruments		35			2			37
Share of results of entities accounted for using the equity method		6			106			112
Fee and commission income		3,801			1,008			4,809
Fee and commission expense		(334	)		(221	)		(555	)
Gains/losses on financial assets and liabilities (net)		333			(1,620	)		(1,286	)
Exchange differences (net)		300			1,176			1,476
Other operating income (expenses)		(92	)		32			(60	)
Total income		10,720			5,251			15,971
Administrative expenses		(4,656	)		(2,529	)		(7,185	)
Depreciation and amortization		(656	)		(190	)		(846	)
Provisions (net)		(1,113	)		(117	)		(1,230	)
Impairment losses on financial assets (net):		(2,864	)		(1,236	)		(4,100	)
Impairment losses on other assets (net)		(4	)		(73	)		(77	)
Gains/losses on disposal of assets not classified as non-current assets held for sale		6			1			7
Gains/losses on disposal of non-current assets held for sale		25			(16	)		9
Profit before tax		1,458			1,091			2,549
Income tax		(217	)		47			(170	)
Net income		1,241			1,138			2,379

We are seeking to generate cumulative cost synergies from the acquisition and integration of Banco Real of approximately R$2.4 billion by December 31, 2010 as a result of applying best practices across the two banks, integrating the information technology platforms, streamlining banking operations and workforce, integrating outsourcing operations and centralizing management functions. In addition, we are targeting cumulative revenue synergies of approximately R$300 million by December 31, 2010 as a result of cross-selling opportunities arising from the integration of Banco Real and Santander Brasil and the implementation of best practices in customer care for each bank’s historical customer base. Our ability to achieve these synergy targets is subject to a number of risks and we may not realize these synergies in the time frames or to the extent expected, if at all. See “Risk Factors—Risks Relating to Santander Brasil and the Brazilian Financial Services Industry—We may fail to recognize the contemplated benefits of the acquisition of Banco Real” and “—Other Factors Affecting Financial Condition and Results of Operations—Goodwill of Banco Real”.

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Other Factors Affecting Financial Condition and Results of Operations

As a Brazilian bank, we are strongly affected by the general economic environment in Brazil. The following table presents key data of the Brazilian economy for the periods indicated.

	Six months ended June 30,			Year ended December 31,
	2009			2008			2007
GDP growth(1)		(1.5	%)		5.1	%		5.4	%
CDI rate(2)		8.96	%		12.28	%		11.91	%
TJLP(3)		6.25	%		6.25	%		6.37	%
SELIC rate(4)		9.25	%		13.75	%		11.25	%
Increase (decrease) in real value against the U.S. dollar		(22.6	%)		(24.2	%)		17.2	%
Selling exchange rate (at period end) R$ per U.S.$1.00		R$1.952			R$2.337			R$1.771
Average exchange rate R$ per U.S.$1.00(5)		R$2.190			R$1.838			R$1.786
Inflation (IGP-M)(6)		1.5	%		9.8	%		7.7	%
Inflation (IPCA)(7)		4.8	%		5.9	%		4.5	%

Sources: BNDES, Central Bank, FGV, IBGE and LCA Consultores.

(1)	Revised series. Source: IBGE.

(2)	The Interbank Deposit Certificate (Certificado de Depósito Interbancário, or “CDI” rate) is the average daily interbank deposit rate in Brazil (at the end of each month and annually).

(3)	Represents the interest rate applied by the BNDES for long-term financing (at the end of the period).

(4)	The benchmark interest rate payable to holders of some securities issued by the Brazilian government and traded on the Special System for Settlement and Custody (Sistema Especial de Liquidação e Custódia).

(5)	Average of the selling exchange rate for the last day of each month during the period.

(6)	The inflation rate is the general index of market prices (Índice Geral de Preços-Mercado, or “IGP-M”), as calculated by FGV.

(7)	The inflation rate is the consumer price index (Índice de Preços ao Consumidor – Amplo, or “IPCA”), as calculated by the IBGE.

Interest Rates

Since the implementation of an inflation targeting framework in 1999, the Central Bank has broadly reduced price volatility and inflation. The SELIC has been lowered from 45.00% per annum in 1999 to 18.00% per annum at the end of 2005, and to 8.75% per annum at July 31, 2009. The following table presents the low, high, average and period-end SELIC since 2005, as reported by the Central Bank. Our assets are predominantly fixed rate and our liabilities predominantly floating. The resulting exposure to increases in market rates of interest is modified by our use of cash flow hedges to convert floating rates to fixed, but we maintain an exposure to interest rate movements. At June 30, 2009, a sustained 100 basis point increase in market rates of interest along the length of the yield curve would have resulted in a R$136 million decline in net interest income over a one year period.

Year	Low		High		Average(1)		Period-End
2005		17.75		19.75		19.15		18.00
2006		13.25		18.00		15.10		13.25
2007		11.25		13.25		11.25		11.25
2008		11.25		13.75		12.54		13.75
2009 (through July 31, 2009)		8.75		12.75		9.92		8.75

(1)	Average of month-end rates during the period.

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Credit Volume

Credit volume in Brazil has strongly increased since 2004, mainly driven by lower inflation, decreasing interest rates and consistent economic growth. According to the Central Bank, the year-on-year growth rate in the volume of credit was 31.1% in 2008, as compared to 27.8% in 2007. At December 31, 2007 and 2008 total bank credit outstanding was equivalent to 34.2% and 41.1%, respectively, of the Brazilian GDP, a relatively small share compared to other countries such as, for example, Chile, where total bank credit to the private sector was equivalent to 89% in 2007 according to central bank statistics. See “Industry—Total Domestic Credit as a Percentage of GDP in 2007”. Despite the global economic crisis, the year-on-year growth rate of credit supplied to corporate clients increased to 38.9% in 2008 from 31.8% in 2007, while the year-on-year growth rate of credit supplied to individuals decreased to 24.2% in 2008 compared to 33.4% in 2007. The volume of credit supplied to the corporate segment decreased in the six months ended June 30, 2009 by 0.5% compared to the six months ended June 30, 2008, while the volume of credit supplied to individuals increased 1.6% in the same period.

Foreign Exchange Rates

At June 30, 2009, we had U.S.$11.4 billion in foreign currency-denominated funding and U.S.$11.4 billion in foreign currency denominated assets. Our policy is to maintain limited foreign exchange rate exposure by seeking to match foreign currency denominated assets and liabilities as closely as possible, including through the use of derivative instruments. We recorded foreign exchange gains of R$1.5 billion in 2008 due to our long position in U.S. dollar-denominated assets and the depreciation of the real against the U.S. dollar in 2008. This gain was offset in large part by corresponding losses on derivatives entered into to hedge this exposure. Such losses are recorded under “Gains/losses on financial assets and liabilities”. The Brazilian currency has during the last decades experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. Between 2000 and 2002, the real depreciated significantly against the U.S. dollar, reaching an exchange rate of R$3.53 per U.S.$1.00 at the end of 2002. Between 2003 and mid-2008, the real appreciated significantly against the U.S. dollar due to the stabilization of the macro-economic environment and a strong increase in foreign investment in Brazil, with the exchange rate reaching R$1.56 per U.S.$1.00 in August 2008. In the context of the crisis in the global financial markets since mid-2008, the real depreciated 31.9% against the U.S. dollar over the year 2008. On December 31, 2008, the exchange rate was R$2.337 per U.S.$1.00 and on June 30, 2009 the exchange rate was R$1.952 per U.S.$1.00. See “Risk Factors—Risks Relating to Brazil” and “Exchange Rates” for a more detailed discussion of the changes in the real to U.S. dollar exchange rate for the periods covered herein.

Inflation

The inflation rate in Brazil has in the past been volatile and at times high, although inflation rates have more recently tended to be lower and more stable. Inflation rates decreased during the period from 2002 to 2003, remained relatively stable during the period from 2003 to 2004, decreased again in 2005 to fall below the official target of 4.5%. In 2008, inflation remained within the target range despite the depreciation of the real against the U.S. dollar. These decreases in inflation have largely been a result of the government’s monetary policy, including periodic changes in interest rates, compulsory deposit requirements and sometimes couple with the appreciation of the real against the U.S. dollar, as between 2002 and 2007.

In general, lower interest rates and stability in terms of inflation lead to increased consumer confidence and increased consumer demand for credit. In addition, a substantial portion of our securities portfolio is indexed to inflation rates in Brazil. As a result, income from securities transactions is directly influenced by fluctuations in these rates.

Reserve and Lending Requirements

The Central Bank’s reserve and lending requirements have a significant effect on the results of operations of banks in Brazil. The raising or lowering of these requirements impacts our results of operations by limiting or increasing the amount of funds available for commercial lending operations.

Beginning in the last quarter of 2008, the Central Bank has amended the reserve requirement rules in order to improve liquidity in Brazil’s financial system. Largely due to these amendments, our level of required reserves and

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lending declined from a high of R$40 billion (or 33% of total deposits) at September 30, 2008 to R$25 billion (or 20% of total deposits) at December 31, 2008 (as calculated under Brazilian GAAP). The principal changes to the required reserves were:

1.	increasing the amount deductible from the Central Bank’s additional reserve requirement for savings deposits, demand deposits and time deposits from R$100 million to R$1 billion;

2.	decreasing the rate applied to calculate the Central Bank’s additional reserve requirement for demand and time deposits from 8% to 4%;

3.	decreasing the rate of the Central Bank’s reserve requirement for demand deposits from 45% to 42%;

4.	increasing the amount deductible from legal reserve requirements for time deposits from R$300 million to R$2 billion; and

changing the form of compulsory deposits for time deposits from 100% in government securities to 30% in government securities (40% as from January 5, 2009) and 70% in cash (60% as from January 5, 2009). The cash reserve requirement may be satisfied with interbank deposits or asset acquisitions from financial institutions having net capital of less than R$7 billion.

The following table sets forth the reserve and lending requirements to which we are subject for each category of funding.

Product	September 30, 2008			Current			Form of Required Reserve	Yield
Demand deposits
Rural credit loans(1)		25	%		30	%		6.75% p.a.
Microcredit loans(2)		2	%		2	%		Cap rate: 2% p.m.
Reserve requirements		45	%		42	%	Cash	Zero
Additional reserve requirements		8	%		5	%	Government Bonds	Overnight Rate
Free funding(3)		20	%		21	%
Savings accounts
Mortgage loans		65	%		65	%		Cap of TR + 12% p.a.
Reserve requirements		20	%		20	%	Cash	TR+ 6.17% p.a.
Additional reserve requirements		10	%		10	%	Government Bonds	Overnight Rate
Free funding(3)		5	%		5	%
Time deposits
Reserve requirements		15	%		15	%
In cash or credit(4)		0	%		9	%	Cash or Credit	Zero for Cash
In government bonds		15	%		6	%	Government Bonds	Overnight Rate
Additional reserve requirements		8	%		4	%	Government Bonds	Overnight Rate
Free funding(3)		77	%		81	%

(1)	Rural credit loans are loans to agricultural customers, of which R$5.6 billion and R$5.4 billion were outstanding as of December 31, 2008 and June 30, 2009, respectively.

(2)	Microcredit loans are loans to very small businesses, of which R$158.5 million and R$164.4 million were outstanding as of December 31, 2008 and June 30, 2009, respectively.

(3)	Free funding is the amount of each category of funding we are free to use for any purpose.

(4)	Includes only credit acquired up to September 30, 2009 from financial institutions having net capital of less than R$7 billion.

Taxes

Our tax expense principally consists of two components: (1) a federal income tax and (2) a social contribution tax. The federal income tax is calculated at a rate of 15%, plus a 10% surtax assessed on taxable profits in excess of

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R$240 million per annum. The social contribution tax is calculated at a rate of 15% (for financial institutions) of certain net revenues (9% in 2007 and the period from January 1, 2008 to April 30, 2008). Deferred tax assets and liabilities are computed based on temporary differences between the book basis and tax basis of assets and liabilities, tax losses, and adjustments to fair value of securities and derivatives. In addition, we are assessed PIS and COFINS taxes at a rate of 4.65% on certain revenues, net of certain expenses. Under IFRS, as described in note 2 to our Financial Statements, since PIS/COFINS taxes are assessed on the basis of certain revenues net of certain expenses, the Bank classifies these taxes as income taxes.

A tax on financial transactions, the “IOF”, is currently paid by the customer on loans at a rate of 0.0041% per day up to a cap of 1.5% plus an additional rate of 0.38% per year. Generally, loans with maturity of greater than 365 days are currently subject to an IOF/credit tax at an annual rate of 1.88%. We are responsible for withholding the IOF but the tax does not affect our reported results.

As a general rule, the tax on banking transactions, the Provisional Contribution on Financial Transactions (Contribuição Provisória sobre Movimentações Financeiras, or “CPMF”), has been charged at the rate of 0.38% on certain financial transactions since June 1999. On December 31, 2007, the CPMF was terminated, and since January 1, 2008, financial transactions have not been subject to the payment of CPMF. When the CPMF was effective, we were responsible for withholding the tax, but it did not affect our reported results except to a non-material extent in connection with our payment of CPMF on certain of our administrative expense payments. Such CPMF amounts are reflected under “Administrative expenses”.

Gains on Sales of Investment Securities

Our results of operations in 2008 and 2007 were materially affected by certain gains on sales of investment securities in 2008. In 2008 and 2007, we had pre-tax gains of R$88 million and R$693 million, respectively, excluding Banco Real, in connection with sales of investment securities, including shares in BM&F, BOVESPA and Serasa S.A.

Cayman Offshore Hedging

We operate a branch in Grand Cayman which is used primarily for sourcing funds in the international banking and capital markets to provide credit lines for us that are extended to our customers for working capital and trade-related financings. Our investment in the Grand Cayman branch is denominated in U.S. dollars in the amount of U.S.$2.6 billion as of December 31, 2008 and U.S.$2.8 billion as of June 30, 2009. We hedge the resulting U.S. dollar-denominated exposure through transactions in U.S. dollar futures. Our position in U.S. dollar futures as of December 31, 2008 was U.S.$1.4 billion and as of June 30, 2009 was U.S.$1.5 billion. Changes in the fair value of these futures are reflected under gains and losses on financial assets. Under Brazilian income tax rules, the gain resulting from the impact of a devaluation of the real on our U.S. dollar denominated investment in the Cayman Island branch is non-taxable and the loss resulting from the impact of an appreciation of the real is not deductible. This tax treatment results in volatility in the income tax items in our income statement. This asymmetry is offset by our hedging results because our derivative positions generate tax deductible loss in the case of devaluation of the real and a taxable gain in the case of appreciation. As a result, the after-tax effect of these derivative positions provides a hedge against the foreign currency exposure resulting from our Cayman Island investment (that is, the R$456 million after-tax effect of the hedge at June 30, 2009 offsets the R$371 million after-tax effect of our Cayman exposure at that date). This investment and our related hedging transactions will continue to result in variations in our effective tax rate.

Goodwill of Banco Real

The potential impairment of goodwill relating to Banco Real may be an important factor affecting our results of operations in future periods. We generated goodwill of R$27.5 billion as a result of the acquisition of Banco Real. Under IFRS, we are required to analyze goodwill for impairment on an annual basis. In 2008, due to the recent incorporation of Banco Real into the group and the results of the related market value calculation and purchase price allocation valuation recently performed, the Bank did not detect, and therefore, did not recognize any impairment losses. We may be required to record an impairment charge in the future if management determines that there is objective evidence of impairment. Any impairment in goodwill relating to the Banco Real acquisition will be

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reflected in our income statement under impairment losses on other assets (net). See “—Critical Accounting Policies—Impairment”. For tax purposes, goodwill is amortized over a seven year period.

Critical Accounting Policies

General

Our principal accounting policies are described in note 2 to our consolidated audited financial statements included elsewhere in this prospectus. The following discussion describes those areas that require the most judgment or involve a higher degree of complexity in the application of the accounting policies that currently affect our financial condition and results of operations. The accounting estimates made in these contexts require management to make assumptions about matters that are highly uncertain. In each case, if management had made other estimates, or if changes in these estimates occur from period to period, these could have a material impact on our financial condition and results of operations.

Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under current circumstances. Actual results may differ from these estimates if assumptions and conditions change. Judgments or changes in assumptions are submitted to the audit and compliance committee of the board of directors and/or to our regulatory authorities and are disclosed in the notes to our consolidated financial statements.

Fair value of financial instruments

We record financial assets and liabilities, financial instruments that are classified at fair value through profit or loss, available for sale securities, and all derivatives at fair value on the balance sheet. The fair value of a financial instrument is the value at which it could be bought or sold in a current transaction between knowledgeable, willing parties on an arm’s length basis. If a quoted price in an active market is available for an instrument, the fair value is calculated based on that price.

If there is no market price available for a financial instrument, its fair value is estimated on the basis of the price established in recent transactions involving the same or similar instruments and, in the absence thereof, on the basis of valuation techniques commonly used by the international financial community, taking into account the specific features of the instrument to be measured and, particularly, the various types of risk associated with it.

We use derivative financial instruments for both trading and non-trading activities. The principal types of derivatives used are interest rate swaps, future rate agreements, interest rate options and futures, foreign exchange forwards, foreign exchange futures, foreign exchange options, foreign exchange swaps, cross currency swaps, equity index futures, equity options, and equity swaps. The fair value of standard derivatives is calculated based on published price quotations. The fair value of over-the-counter derivatives is calculated as the sum of the expected future cash flows arising from the instrument, discounted to present value at the date of measurement (“present value” or “theoretical close”) using valuation techniques commonly used by the financial markets as follows:

The present value method for valuing financial instruments permitting static hedging (principally, forwards and swaps) and loans and advances. Expected future cash flows are discounted using the interest rate curves of the applicable currencies. The interest rate curves are generally observable market data.

The Black-Scholes model for valuing financial instruments requiring dynamic hedging (principally structured options and other structured instruments). Certain observable market inputs are used in the Black-Scholes model to generate variables such as the bid-offer spread, exchange rates, volatility, correlation between indexes and market liquidity, as appropriate.

Each of the present value method and Black-Scholes models is used for valuing financial instruments exposed to interest rate risk, such as interest rate futures, caps and floors. For more structured instruments that require dynamic hedging, the Heath-Jarrow-Morton model is used. The main inputs used in these models are principally observable market data, including appropriate interest rate curves, volatilities, correlations and exchange rates.

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We use dynamic models similar to those used in the measurement of interest rate risk for measuring credit risk of linear instruments (such as bonds and fixed-income derivatives). In the case of non-linear instruments, if they are exposed to portfolio credit risk (such as credit derivatives), the joint probability of default is determined using the Standard Gaussian Copula model. The main inputs used in the Standard Gaussian Copula model are generally data relating to individual issuers in the portfolio and correlations thereto. The main inputs used in determining the underlying cost of credit for credit risk derivatives are quoted credit spreads, and the correlation between individual issuers’ quoted credit derivatives.

The determination of fair value requires us to make certain estimates and assumptions. If quoted market prices are not available, fair value is calculated using widely accepted pricing models that consider contractual prices of the underlying financial instruments, yield curves, contract terms, observable market data, and other relevant factors. The use of different estimates or assumptions in these pricing models could lead to a different valuation being recorded in our consolidated financial statements.

See note 2d(iii) to our consolidated financial statements for additional information on valuation techniques used by us and details of the principal assumptions and estimates used in these models and the sensitivity of the valuation of financial instruments to changes in the principal assumptions used.

Allowance for credit losses

We assess financial assets accounted for at amortized cost for objective evidence of impairment. Any resulting allowances for credit losses are recognized and measured in accordance with IAS 39. Credit losses exist if the carrying amount of an asset or a portfolio of assets exceeds the present value of the estimated future cash flows.

We cover losses inherent in debt instruments not measured at fair value through profit or loss and in contingent liabilities taking into account the historical experience of impairment and other circumstances known at the time of assessment. For these purposes, inherent losses are losses incurred at the reporting date, calculated using statistical methods that have not yet been allocated to specific transactions.

We use the concept of incurred loss to quantify the cost of the credit. Incurred loss is the expected cost, on average in a complete business cycle, of the credit risk of a transaction, considering the characteristics of the counterparty and the guarantees and collateral associated with the transaction.

The credit portfolio is broken down, identifying clusters that show, within each cluster, homogeneous levels in the estimated parameters of probability of default, or “PD”, and loss given default, or “LGD”, and stability on those parameters for a period of historical data of 5 years for PD and 7 years for the LGD. Each of these clusters demonstrates distinct levels of these parameters.

For each business segment, incurred loss is calculated by using statistical models that consider the following three factors: “exposure at default”, “probability of default” and “loss given default”.

·	Exposure at default or “EAD” is the amount of risk exposure at the date of default by the counterparty.

In accordance with IFRS, the exposure at default used for this calculation is the current exposure, as reported in the balance sheet.

·	Probability of default, or “PD”, is the probability of the counterparty failing to meet its principal and/or interest payment obligations.

PD is measured using a time horizon of one year; i.e. it quantifies the probability of the counterparty defaulting in the coming year. The definition of default includes amounts past due by 90 days or more and cases in which there are no arrears but there are doubts as to the solvency of the counterparty (subjective doubtful assets).

·	Loss given default, or “LGD”, is the loss arising in the event of default.

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LGD calculation is based on the observation of the recoveries of defaulted loans, taking into account the guarantees/collateral associated with the transaction, the income and expenses associated with the recovery process, and also the timing thereof and the indirect costs arising from the recovery process.

Our methodology for determining the allowance in respect of incurred losses that have not been specifically identified seeks to identify the amount of incurred losses as of the balance sheet date of loans that have not yet been identified as impaired, but that we estimate, based on our past experience will manifest within one year from the balance sheet date. We refer to such impairment as inherent losses in the context of our internal credit loss allowance models.

The approach described above is used as a general rule and covers almost the entire portfolio. However, for low default portfolios (sovereign risk, credit institutions or large corporations) the number of defaults observed is very small or zero. In these cases, we use data contained in the credit derivative spreads to estimate the expected loss discounted by the market and break it down into PD and LGD.

Impairment

Certain assets, including goodwill, other intangible assets, equity method investments, financial assets not carried at fair value through profit or loss and other assets are subject to impairment review. We record impairment charges when we believe there is objective evidence of impairment, or that the cost of the assets may not be recoverable. Assessment of what constitutes impairment is a matter of significant judgment.

We test goodwill and other intangible assets for impairment on an annual basis, or more frequently if events or changes in circumstances, such as an adverse change in business climate or observable market data, indicate that these assets may be impaired. The first step of the impairment review process requires the identification of cash-generating units, or “CGUs”. These are the smallest identifiable group of assets that, as a result of continuing operations, generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Goodwill is then allocated to these CGUs. This allocation is reviewed following a business reorganization. The carrying value of the CGU, including the allocated goodwill, is compared to its fair value to determine whether an impairment exists. An impairment loss recognized for goodwill may not be reversed in a subsequent period. The fair value determination used in the impairment assessment requires estimates based on quoted market prices, prices of comparable businesses, present value or other valuation techniques, or a combination thereof, requiring management to make subjective judgments and assumptions. Events and factors that may significantly affect the estimates include, among other things, competitive forces, customer behaviors and attrition, changes in revenue growth trends, cost structures and technology, and changes in discount rates and specific industry or market sector conditions.

All debt and equity securities (other than those carried at fair value through profit or loss) are subject to impairment testing every reporting period. The carrying value is reviewed in order to determine whether an impairment loss has been incurred.

Evaluation for impairment includes both quantitative and qualitative considerations. For debt securities, such considerations include actual and estimated incurred credit losses indicated by payment default, market data on (estimated) incurred losses and other current evidence that the issuer may not pay amounts when due. Equity securities are impaired when management believes that, based on (the combination of) a significant or prolonged decline of fair value below the acquisition price, there is sufficient reason to believe that the acquisition cost may not be recovered. “Significant” and “prolonged” are interpreted on a case-by-case basis for specific equity securities.

Upon impairment, the full difference between amortized cost and fair value is removed from equity and recognized in net profit or loss. Impairments on debt securities may be reversed if there is a decrease in the amount of the impairment which can be objectively related to an observable event. Impairments on equity securities may not be reversed.

Retirement Benefit Obligations

The Bank provides pension plans in the form of both defined contribution plans and defined benefit plans, in accordance with IAS 19. For defined contribution plans, the pension cost recognized in the consolidated income

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statement represents the contribution payable to the scheme. For defined benefit plans, the pension cost is assessed in accordance with the advice of a qualified external actuary using the projected unit credit method. This cost is charged annually to the consolidated income statement.

The actuarial valuation is dependent upon a series of assumptions; the principal ones are set forth below:

·	assumed interest rates;

·	mortality tables;

·	annual social security pension revision rate;

·	price inflation;

·	annual salary growth rate, and

·	the method used to calculate vested commitments to current employees.

The difference between the fair value of the plan assets and the present value of the defined benefit obligation at the balance sheet date, adjusted for any historic unrecognized actuarial gains or losses and past service cost, is recognized as a liability in the balance sheet.

Further information on retirement benefit obligations is set out in notes 2 and 21 to our consolidated financial statements.

Results of Operations

We are a financial group whose main business focus is commercial banking, complemented by global wholesale banking, asset management and insurance businesses.

Our main source of income is the interest that we earn from our lending activities, by borrowing funds from customers at certain rates and lending them to other customers at different rates. We also derive income from the interest and dividends that we receive from our investments in fixed/variable income and equity securities, from our trading activities in such securities and derivatives, by buying and selling these instruments to take advantage of current and/or expected differences between purchase and sale prices, and from entering into derivative transactions with customers on which we hedge our market risk exposure and earn a spread.

Another source of income is the fees and commissions that we earn from the different banking and other financial services that we provide, including credit and debit cards, insurance sales, account management, bill discounting, guarantees and other contingent liabilities, advisory and custody services, and from our mutual and pension funds management services.

In addition, from time to time, we derive income from the capital gains we make from the sale of our holdings in group companies.

Results of Operations for the Six Months Ended June 30, 2009 Compared to the Six Months Ended June 30, 2008

As a consequence of our acquisition of Banco Real in August 2008, our results of operations for the six months ended June 30, 2008 and 2009 are not comparable. In order to analyze the organic developments in our business, we discuss pro forma information for the first six months of 2008 as if we had consolidated Banco Real as from January 1, 2008. For a complete presentation of this pro forma information, see “Unaudited Pro Forma Consolidated Financial Information”.

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	For the six months ended June 30,
	2009		2008 (pro forma)		2008		% Change			% Change (pro forma)
	(in millions of R$)
Net interest income		10,661		9,427		3,332		220	%		13	%
Income from equity instruments		15		18		16		(9	%)		(20	%)
Net fees and commissions		3,016		2,940		1,717		76	%		3	%
Share of results of entities accounted for using the equity method		257		161		2	n.m.				59	%

Gains/losses on financial assets and liabilities (net)	2,734		1,459		686			298	%		87	%
Exchange differences (net)	(1,037	)	(470	)	(145	)	n.m.				120	%
Other operating income (expenses)	(163	)	26		(35	)		365	%	n.m.
Administrative expenses	(5,380	)	(5,535	)	(2,234	)		141	%		(3	%)
Depreciation and amortization	(495	)	(546	)	(310	)		60	%		(9	%)
Provisions (net)	(1,958	)	(934	)	(522	)		275	%		110	%
Impairment losses on financial assets (net):	(4,831	)	(3,194	)	(1,496	)		223	%		51	%
Impairment losses on other assets (net)	(68	)	(15	)	(9	)	n.m.				355	%
Gains/losses on disposal of assets not classified as non-current assets held for sale	1,145		38		32		n.m.			n.m.
Gains/losses on disposal of non-current assets held for sale	(56	)	(14	)	(24	)		137	%		311	%
Profit before tax	3,840		3,361		1,010			280	%		14	%
Income tax	(1,395	)	(1,191	)	(303	)		361	%		17	%
Net income	2,445		2,170		707			246	%		13	%

Summary

Net income in the six months ended June 30, 2009 was R$2.4 billion, a 246% or R$1.7 billion increase from R$707 million in the six months ended June 30, 2008. The increase was mainly due to the consolidation of Banco Real in our financial statements. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, net income in the six months ended June 30, 2009 increased by 13% compared to R$2.2 billion in the six months ended June 30, 2008. This increase was mainly due to:

·	An increase of 18.6% in average credit volumes and a resulting increase in revenues from lending operations. The credit market in Brazil continues to grow, although that growth has slowed to date in 2009. Credit balances at June 30, 2009 were 12.2% higher than at December 31, 2008;

·	A R$1.6 billion increase in credit impairment losses driven by deteriorating economic conditions;

·	Capital gains of R$1,096 million realized upon the sale of part of our interests in Visanet, offset by an increase in provisions for contingencies

Net Interest Income

Santander Brasil’s net interest income in the six months ended June 30, 2009 was R$10.7 billion, a 220% or R$7.3 billion increase from R$3.3 billion in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, net interest income in the six months ended June 30, 2009 increased by 13% compared to R$9.4 billion in the six months ended June 30, 2008. This increase was mainly due to growth in our lending activities, in addition to an increase in the average spread of our credit assets over interbank rates.

Average total earning assets in the six months ended June 30, 2009 were R$221.2 billion, a 144% or R$131 billion increase from R$90.7 billion in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, average total earning assets in the six months ended June 30, 2009 increased 11% compared to R$199.8 billion at June 30, 2008. The principal driver of this increase was a 19% or R$21.1 billion increase in average loans and advances to customers, offset in part by a 30% or R$7 billion decrease in cash and balances with the Central Bank as the Central Bank reduced reserve requirements pursuant to Resolution No. 3,634. The increase in loans and advances was driven by a 30% increase in corporate lending, principally trade finance in our Global Wholesale Banking segment, as well as an increase in retail lending mainly driven by a 39.6% increase in mortgage lending and a 23.9% increase in unsecured personal credit. The growth in mortgage lending

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was in line with the growth of this product in the Brazilian market as the housing credit market is still very incipient in Brazil in comparison with more mature economies. The increase in personal credit was also in line with market trends in Brazil.

Net interest income also benefited from a 40 basis point increase in the spread of the average yield earned on our interest earning credit assets over the average CDI rate, which is a proxy for the cost of interbank funding. This spread is the way we evaluate the yield earned on our assets. The increase in this spread reflects increase in credit risk that we bear as a result of economic and credit conditions arising from the recent economic crisis, offset in part by a relative decrease in the percentage of our total portfolio comprised of higher-risk retail lending.

Average total interest bearing liabilities in the six months ended June 30, 2009 were R$186.6 billion, a 154% or R$113.2 billion increase from R$73.4 billion in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, average total interest bearing liabilities in the six months ended June 30, 2009 increased 17% compared to R$159.5 billion in the six months ended June 30, 2008. The principal driver of this increase was an increase in time deposits, the average balance of which increased by 44% to R$32.3 billion on a pro forma basis. This growth resulted from a movement of customer funds out of mutual funds and other similar vehicles into lower-risk bank deposits as well as a “flight to quality” as Brazilian customers moved their savings to larger financial institutions.

Net Fees and Commission Income

Net fees and commission income in the six months ended June 30, 2009 was R$3.0 billion, a 76% or R$1.3 billion increase from R$1.7 billion in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, net fees and commission income in the six months ended June 30, 2009 increased by 3% compared to R$2.9 billion in the six months ended June 30, 2008. This increase was mainly due to a R$77 million growth in the trade finance business and a R$64 million increase in commission on the sale of insurance, offset in part by a R$119 million decline in banking fees that reflects restrictions imposed by our regulators during 2008.

The following table reflects the breakdown of net fee and commission income in the six months ended June 30, 2009 and 2008 (on a pro forma basis).

	For the six months ended June 30,
	2009			2008 (pro forma)			% Change
	(in millions of R$)
Banking fees		1,346			1,466			(8.1	)
Sale of insurance		475			411			15.7
Investment funds		324			381			(14.8	)
Credit and debit cards		362			328			10.4
Capital markets		189			188			0.5
Trade finance		246			169			45.9
Tax on services		(173	)		(178	)		(2.9	)
Others		247			177			39.1
Total		3,016			2,940			2.6

Share of Results of Entities Accounted for using the Equity Method

Share of results of entities accounted for using the equity method in the six months ended June 30, 2009 was R$257 million, a R$255 million increase from R$2 million in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, share of results of entities accounted for using the equity method in the six months ended June 30, 2009 increased 59% compared to R$161 million in the six months ended June 30, 2008. This increase was mainly due to gains of R$126 million from ABN Dois Participações, R$110 million of which was due to the sale of Real Capitalização business, to our affiliate Santander Seguros.

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Gains (Losses) on Financial Assets and Liabilities (Net)

Gains (losses) on financial assets and liabilities (net) in the six months ended June 30, 2009 were gains of R$2.7 billion, a 215% or R$2.0 billion increase from gains of R$686 million in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, gains (losses) on financial assets and liabilities (net) in the six months ended June 30, 2009 increased 87% compared to R$1.5 billion in the six months ended June 30, 2008. An amount of R$567 of these gains relate to foreign currency derivatives entered into to hedge our exposure and were partially offset by foreign exchange losses recorded under exchange differences. In addition, the increase was driven by a R$475 million increase in gains on our Cayman Islands investment hedge, a R$126 million increase in proceeds from the sale of long-term investments upon the sale of part of our interests in BOVESPA and BM&F and a R$115 million increase in proceeds from the sale of available for sale securities offset in part by a R$145 million decrease in results from our proprietary trading activities. As noted above under “—Other Factors Affecting Financial Condition and Results of Operations—Cayman Offshore Hedging”, changes in our Cayman Islands investment hedge are offset by corresponding change in our income tax rate. See “—Income Tax” below.

Exchange Differences (Net)

Exchange differences (net) in the six months ended June 30, 2009 were a loss of R$1.0 billion, a R$892 million increase from a loss of R$145 million in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, exchange differences (net) in the six months ended June 30, 2009 increased 120% compared to a loss of R$470 million in the six months ended June 30, 2008 due primarily to the average depreciation of the real against the U.S. dollar for the six months ended June 30, 2009 compared to the six months ended June 30, 2008. These losses were largely offset by gains on derivative transactions settled to hedge our foreign currency exposure. See “— Gains (Losses) on Financial Assets and Liabilities (Net)” above.

Other Operating Income (Expenses)

Other operating income (expenses) in the six months ended June 30, 2009 was expense of R$163 million, compared to expense of R$35 million in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, other operating income (expenses) in the six months ended June 30, 2009 were expenses of R$163 million compared to income of R$25 million in the six months ended June 30, 2008. This change was mainly due to declines in fees relating to auto loan originations and declines in banking fees for checking accounts and lending/leasing commissions due to limits imposed by the Central Bank starting in May 2008.

Administrative Expenses

Administrative expenses changed from R$2.2 billion in the six months ended June 30, 2008, or R$5.5 billion on a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, to R$5.4 billion in the six months ended June 30, 2009. The decrease on a pro forma basis was primarily due to the cost synergies created as a result of the merger between Santander Brasil and Banco Real, particularly from personnel reductions, offset in part by salary increases tied to inflation. As a result, our efficiency ratio, which we calculate as administrative expenses divided by total income, decreased from 40.8% for the six months ended June 30, 2008 on a pro forma basis to 34.7% for the six months ended June 30, 2009.

Personnel expenses

The following table sets forth personnel expenses for each of the periods indicated.

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	For the six months ended June 30,
	2009		2008 (pro forma)
	(in millions of R$)
Wages and salaries		1,664		1,750
Social security costs		456		453
Additions to provisions for defined benefit pension plans		18		22
Contributions to defined contribution pension funds		36		20
Share-based payment costs(1)		10		7
Benefits		362		339
Other personnel expenses		166		142
Total		2,712		2,763

(1)	Granted typically to members of our board of directors and to our executive directors and officers.

Provisions (Net)

Provisions principally include provisions for civil claims, labor claims and tax contingencies. Provisions (net) was R$2.0 billion in the six months ended June 30, 2009, compared to R$522 million in the six months ended June 30, 2008, or R$934 million on a pro forma basis. This increase reflected provisions for restructuring costs associated with the Banco Real acquisition, as well as increased provisions for other labor and civil claims.

Impairment Losses on Financial Assets (Net)

Impairment losses on financial assets (net) in the six months ended June 30, 2009 were R$4.8 billion, a 223% or R$3.3 billion increase from R$1.5 billion in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, impairment losses on financial assets (net) in the six months ended June 30, 2009 increased 51% compared to R$3.2 billion in the six months ended June 30, 2008. This increase was mainly due to deteriorating credit quality in nearly all of our businesses (though primarily in small business lending, individual lending and consumer finance products) as a result of worsening economic conditions in Brazil in the second half of 2008 and the first few months of 2009.

The following table shows the ratio of our impaired assets to total computable credit risk and our coverage ratio at June 30, 2009 and 2008 (pro forma) and December 31, 2008.

	At June 30,			At December 31,			At June 30,
	2009			2008			2008 (pro forma)
	(in millions of R$, except percentages)

Computable credit risk(1)		162,937			164,695			66,682
Non-performing assets		9,431			7,730			2,184
Allowances for credit losses		9,159			8,181			2,451
Ratios
Non-performing assets to computable credit risk		5.8	%		4.7	%		3.3	%
Coverage ratio(2)		97.1	%		105.8	%		112.2	%

(1)	Computable credit risk is the sum of the face amounts of loans and leases (including non-performing assets but excluding country risk loans), guarantees and documentary credits.

(2)	Allowances for credit losses as a percentage of non-performing assets.

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The following table shows our non-performing assets by type of loan at June 30, 2009 and December 31, 2008 and 2007.

	At June 30,		At December 31,		At June 30,
	2009		2008		2008
	(in millions of R$)

Impaired assets
Commercial, financial and industrial		3,728		2,730		523
Real estate – mortgage		83		74		22
Installment loans to individuals		5,364		4,528		1,575
Lease financing		255		398		62
Total		9,430		7,730		2,184

Commercial, financial and industrial

Non-performing assets in commercial, financial and industrial loans increased by R$1.0 billion from December 31, 2008 to June 30, 2009. This increase was due primarily to a decline in domestic and international demand, increased volatility in the exchange rate of the real and the liquidity crunch that resulted in reduced financing for companies since the last quarter of 2008. This situation was managed on a case by case basis, adjusting debt service on performing loans to cash flow generation of companies experiencing credit problems, subject to receipt of improved collateral or other credit enhancement.

Real estate – mortgage

Non-performing assets in real estate – mortgage loans remained stable, with an increase of only R$9 million from December 31, 2008 to June 30, 2009.

Installment loans to individuals

Non-performing assets in installment loans to individuals increased by R$836 million from December 31, 2008 to June 30, 2009 due primarily to increases in unemployment, with job destruction beginning in the last quarter of 2008. As a result, individual customers increased their use of overdraft limits and credit card limits, which led to an increase in non-performing assets as such borrowers experienced higher rates of default.

Lease financing

Non-performing loans in lease financing decreased by R$143 million from December 31, 2008 to June 30, 2009 due primarily to new strategies we implemented to improve collections, including speeding up the process of collecting on collateral, as well as the slowdown in the auto loan portfolio since June 2008.

Impairment Losses on Other Assets (Net)

Other impairment losses on other assets (net) in the six months ended June 30, 2009 were R$68 million, a R$59 million increase from R$9 million in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, impairment losses on other assets (net) in the six months ended June 30, 2009 increased 355% compared to R$15 million in the six months ended June 30, 2008. This increase was mainly due to increases in impairment on real properties as a result of closing certain of our office buildings in connection with the expected move to our new headquarters.

Income Tax

Income tax was R$1.4 billion in the six months ended June 30, 2009, a 361% or R$1.1 billion increase from R$303 million in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, income tax in the six months ended June 30, 2009 increased 17% compared to R$1.2 billion in the six months ended June 30, 2008. Our effective tax rates, in the six months ended June 30, 2008 (on a pro forma basis) and 2009, were 35% and 36%, respectively. In the six months ended June 30, 2009, the 16% valuation of the real against the dollar on the net equity of our Cayman Island branch caused an increase of R$428 million in the tax expenses, compared to R$178 million in the six months ended June 30, 2008. See “—Other Factors Affecting Financial Condition and Results of Operations—Cayman Offshore Hedging”. On the other hand, the tax expenses were reduced by R$423 million due to an increase in deductible goodwill amortization, compared to R$152 million in the first half of 2008.

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Results of Operations by Segment for the Six Months Ended June 30, 2009 Compared to the Six Months Ended June 30, 2008

The following tables present an overview of certain income statement data for each of our operating segments for the six months ended June 30, 2009 and 2008.

	For the six months ended June 30, 2009
	Commercial Banking			% of Total			Global Wholesale Banking			% of Total			Asset Management and Insurance			% of Total			Total
	(in millions of R$, except percentages)
	(condensed income statement)
Net interest income		9,751			91.5	%		894			8.4	%		17			0.2	%		10,661
Share of results of entities accounted for using the equity method		257			100.0	%		—			—			—			—			257
Net fee and commission income		2,441			80.9	%		390			12.9	%		185			6.1	%		3,016
Gains/losses on financial assets and liabilities		1,106			65.1	%		566			33.4	%		25			1.5	%		1,698
Other operating income/(expenses)		(147	)		90.1	%		(16	)		10.0	%		—			(0.1	%)		(163	)
Personnel expenses		(2,485	)		91.6	%		(203	)		7.5	%		(25	)		0.9	%		(2,712	)
Other administrative expenses		(2,563	)		96.1	%		(96	)		3.6	%		(9	)		0.3	%		(2,667	)
Impairment losses on financial assets (net)		(4,832	)		100.0	%		2			—			—			—			(4,831	)
Provisions (net)		(1,949	)		99.5	%		7			(0.4	%)		(17	)		0.9	%		(1,959	)
Impairment losses on non-financial assets (net)		(68	)		100.0	%		—			—			—			—			(68	)
Profit (loss) before tax		2,138			55.7	%		1,526			39.7	%		175			4.6	%		3,840

	For the six months ended June 30, 2008
(Condensed) Income Statement	Commercial Banking			% of Total			Global Wholesale Banking			% of Total			Asset Management and Insurance			% of Total			Total
	(in millions of R$, except percentages)
	(condensed income statement)
Net interest income		8.806			82.6	%		587			5.5	%		33			0.3	%		9,427
Share of results of entities accounted for using the equity method		161			62.8	%		—			—			—			—			161
Net fee and commission income		2,457			81.4	%		299			9.9	%		185			6.1	%		2,940
Gains/losses on financial assets and liabilities		398			23.4	%		585			34.5	%		6			0.3	%		989
Other operating income/(expenses)		55			(33.3	%)		(29	)		17.5	%		(1	)		0.4	%		25
Personnel expenses		(2,431	)		89.6	%		(306	)		11.3	%		(27	)		1.0	%		(2,763	)
Other administrative expenses		(2,653	)		99.4	%		(105	)		3.9	%		(14	)		0.5	%		(2,772	)
Impairment losses on financial assets (net)		(3,185	)		65.9	%		(10	)		0.2	%		—			—			(3,195	)
Provisions (net)		(881	)		45.0	%		(48	)		2.4	%		(5	)		0.3	%		(934	)
Impairment losses on non-financial assets (net)		(15	)		22.0	%		—			—			—			—			(15	)
Profit (loss) before tax		2,243			58.4	%		943			24.6	%		175			4.6	%		3,361

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The following tables show our results of operations for the six months ended June 30, 2009 and 2008 (actual results and on a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008), for each of our operating segments.

Commercial Banking	For the six months ended June 30,
	2009			2008 (pro forma)			2008
	(in millions of R$)
Net interest income		9,751			8,806			2,893
Income from equity instruments		15			18			16
Share of results of entities accounted for using the equity method		257			161			2
Net fee and commission income		2,441			2,457			1,481
Gains/losses on financial assets and liabilities (net)		1,106			398			133
Other operating income (expenses)		(147	)		55			(26	)
Total income		13,423			11,895			4,499
Personnel expenses		(2,485	)		(2,431	)		(998	)
Other administrative expenses		(2,563	)		(2,653	)		(1,022	)
Depreciation and amortization of tangible and intangible assets		(476	)		(513	)		(296	)
Provisions (net)		(1,949	)		(881	)		(470	)
Impairment losses on financial assets (net):		(4,832	)		(3,185	)		(1,497	)
Impairment losses on other assets (net)		(68	)		(15	)		(9	)
Other non-financial gains (losses)		1,089			25			8
Profit (loss) before tax		2,138			2,243			216

Global Wholesale Banking	For the six months ended June 30,
	2009			2008 (pro forma)			2008
	(in millions of R$)
Net interest income		894			587			435
Income from equity instruments		—			—			—
Share of results of entities accounted for using the equity method		—			—			—
Net fee and commission income		390			299			152
Gains/losses on financial assets and liabilities (net)		566			585			402
Other operating income (expenses)		(16	)		(29	)		(8	)
Total income		1,834			1,443			980
Personnel expenses		(203	)		(306	)		(142	)
Other administrative expenses		(96	)		(105	)		(49	)
Depreciation and amortization of tangible and intangible assets		(19	)		(31	)		(12	)
Provisions (net)		7			(48	)		(48	)
Impairment losses on financial assets (net):		2			(10	)		—
Impairment losses on other assets (net)		—			0			—
Other non-financial gains (losses)		—			0			—
Profit (loss) before tax		1,526			943			730

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Asset Management and Insurance	For the six months ended June 30,
	2009			2008 (pro forma)			2008
	(in millions of R$)
Net interest income		17			33			4
Income from equity instruments		—			0			—
Share of results of entities accounted for using the equity method		—			0			—
Net fee and commission income		185			185			84
Gains/losses on financial assets and liabilities (net)		25			6			6
Other operating income (expenses)		—			(1	)		(1	)
Total income		226			223			94
Personnel expenses		(25	)		(27	)		(16	)
Other administrative expenses		(9	)		(14	)		(8	)
Depreciation and amortization of tangible and intangible assets		—			(2	)		(2	)
Provisions (net)		(17	)		(5	)		(4	)
Impairment losses on financial assets (net):		—			—			—
Impairment losses on other assets (net)		—			—			—
Other non-financial gains (losses)		—			—			—
Profit (loss) before tax		175			175			63

Commercial Banking Segment Consolidated Results of Operations for the Six Months Ended June 30, 2009 Compared to the Six Months Ended June 30, 2008

Summary

Profit before income tax attributed to the Commercial Banking segment in the six months ended June 30, 2009 was R$2.1 billion, a R$1.9 billion increase from R$216 million in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, profit before income tax attributed to the Commercial Banking segment in the six months ended June 30, 2009 decreased R$100 million compared to R$2.2 billion for six months ended June 30, 2008.

Net Interest Income

Net interest income for the Commercial Banking segment in the six months ended June 30, 2009 was R$9.8 billion, a 237% or R$6.9 billion increase from R$2.9 billion in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, net interest income for the Commercial Banking segment in the six months ended June 30, 2009 increased 10.7% compared to R$8.8 billion for the six months ended June 30, 2008. This increase was mainly due to increased average balances of loans and an increase in the average spread of our credit assets over interbank rates.

Share of Results of Entities Accounted for using the Equity Method

Share of results of entities accounted for using the equity method for the Commercial Banking segment in the six months ended June 30, 2009 was R$257 million, a R$255 million increase from R$2 million in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, share of results of entities accounted for using the equity method for the Commercial Banking segment in the six months ended June 30, 2009 increased 59% compared to R$161 million in the six months ended June 30, 2008. This increase was mainly due to gains of R$126 million from ABN Dois Participações related to the sale of Real Capitalização to Santander Seguros.

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Net Fee and Commission Income

Net fees and commission income for the Commercial Banking segment in the six months ended June 30, 2009 were R$2.4 billion, a 64.8% or R$960 million increase from R$1.5 billion in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, net fees and commission income for the Commercial Banking segment in the six months ended June 30, 2009 decreased 0.6% compared to R$2.5 billion in the six months ended June 30, 2008. This decrease was mainly due to a decrease in banking fees due to restrictions imposed by our regulators in 2008.

Gains/(Losses) on Financial Assets and Liabilities

Gains (losses) on financial assets and liabilities (net) for the Commercial Banking segment in the six months ended June 30, 2009 were gains of R$1.1 billion, a R$972 million increase from R$133 billion in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, gains (losses) on financial assets and liabilities (net) for the Commercial Banking segment in the six months ended June 30, 2009 increased 178% compared to gains of R$398 million in the six months ended June 30, 2008. These gains were partially offset by losses recorded under exchange differences and resulting from our foreign currency exposure. The increase in gains in the prior period principally reflected a R$475 million increase in gains on our Cayman Islands investment hedge, which was offset by an increase in income tax expenses, and a R$126 million increase in proceeds from the sale of long-term investments upon the sale of part of our interests in BOVESPA and BM&F in 2008.

Other Operating Income/(Expenses)

Other operating income (expenses) for the Commercial Banking segment in the six months ended June 30, 2009 were expenses of R$147 million, compared to expense of R$26 million in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, other operating income (expenses) for the Commercial Banking segment in the six months ended June 30, 2008 was income of R$55 million. This change was mainly a result of declines in banking fees for checking accounts and lending/leasing commissions due to limits imposed by the Central Bank starting in May 2008.

Personnel Expenses

Personnel expenses for the Commercial Banking segment increased from R$1.0 billion in the six months ended June 30, 2008 to R$2.5 billion in the six months ended June 30, 2009, a 149% or R$1.6 billion increase. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, personnel expenses for the Commercial Banking segment in the six months ended June 30, 2008 increased from R$2.4 billion to R$2.5 billion in the six months ended June 30, 2009, a 2% or R$54 million increase, reflecting higher personnel expenses in line with historical trends of salary increases tied to inflation, partially offset by the cost synergies resulting from the merger of Santander Brasil and Banco Real.

Other General Administrative Expenses

Other general administrative expenses for the Commercial Banking segment increased from R$1.0 billion in the six months ended June 30, 2008 to R$2.6 billion in the six months ended June 30, 2009, a 151% or R$1.5 billion increase. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, other general administrative expenses for the Commercial Banking segment in the six months ended June 30, 2008 decreased from R$2.7 billion to R$2.6 billion in the six months ended June 30, 2009, a 3% or R$90 million decrease, primarily due to cost synergies resulting from the merger of Santander Brasil and Banco Real.

Impairment Losses on Financial Assets (Net)

Impairment losses on financial assets (net) for the Commercial Banking segment in the six months ended June 30, 2009 were R$4.8 billion, a 223% or R$3.3 billion increase from R$1.5 billion in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, impairment losses on financial assets (net) for the Commercial Banking segment in the six months ended June 30, 2009

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increased 52% compared to R$3.2 billion in the six months ended June 30, 2008. This increase was mainly due to the deteriorating credit quality caused by worsening economic conditions in Brazil in the second half of 2008 and the first few months of 2009.

Provisions (Net)

Provisions (net) for the Commercial Banking segment were R$1.9 billion in the six months ended June 30, 2009, compared to R$470 million in the six months ended June 30, 2008 or R$881 million on a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008. Provisions principally include provisions for labor and tax contingencies.

Impairment Losses on Non-Financial Assets (Net)

Other impairment losses on other assets (net) for the Commercial Banking segment in the six months ended June 30, 2009 were R$68 million, a R$59 million increase from R$9 million in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, impairment losses on other assets (net) for the Commercial Banking segment in the six months ended June 30, 2009 increased 355% compared to R$15 million in the six months ended June 30, 2008. This increase was mainly due to increases in impairment on real properties as a result of closing certain of our office buildings in connection with the expected move to our new headquarters.

Global Wholesale Banking Consolidated Results of Operations for the Six Months Ended June 30, 2009 Compared to the Six Months Ended June 30, 2008

Summary

Profit before income tax attributed to the Global Wholesale Banking segment in the six months ended June 30, 2009 was R$1.5 billion, a 109% or R$796 million increase from R$730 million in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, profit before income tax attributed to the Global Wholesale Banking segment in the six months ended June 30, 2009 increased 62% compared to R$943 million for the six months ended June 30, 2008.

Net Interest Income

Net interest income for the Global Wholesale Banking segment in the six months ended June 30, 2009 was R$894 million, a 105% or R$459 million increase from R$435 million in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, net interest income for the Global Wholesale Banking segment in the six months ended June 30, 2009 increased 52% compared to R$587 million for the six months ended June 30, 2008, reflecting growth in the credit portfolio of our GB&M customers, principally trade finance.

Net Fee and Commission Income

Net fees and commission income for the Global Wholesale Banking segment in the six months ended June 30, 2009 was R$390 million, a 157% or R$238 million increase from R$152 million in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, net fees and commission income for the Global Wholesale Banking segment in the six months ended June 30, 2009 increased 30% compared to R$299 million in the six months ended June 30, 2008. This increase was mainly due to a R$70 million increase in trade finance business commissions resulting from a higher volume of transactions in 2009.

Gains/(Losses) on Financial Assets and Liabilities

Gains (losses) on financial assets and liabilities (net) for the Global Wholesale Banking segment in the six months ended June 30, 2009 were gains of R$566 million, a 41% or R$165 million increase from gains of R$402 million in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, gains (losses) on financial assets and liabilities (net) for the Global Wholesale Banking segment in the six months ended June 30, 2009 decreased 3% compared to gains of R$585 million in the six months ended June 30, 2008. This decrease was mainly due to a R$145 million decline in earnings from our proprietary treasury business, offset in large part by a R$126 million increase in derivatives transactions for our customers.

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Other Operating Income/(Expenses)

Other operating income (expenses) for the Global Wholesale Banking segment in the six months ended June 30, 2009 was expense of R$16 million, compared to expense of R$8 million in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, other operating income (expenses) for the Global Wholesale Banking segment in the six months ended June 30, 2009 decreased 45% compared to expense of R$29 million in the six months ended June 30, 2008.

Personnel Expenses

Personnel expenses for the Global Wholesale Banking segment increased from R$142 million in the six months ended June 30, 2008 to R$203 million in the six months ended June 30, 2009, a 43% or R$61 million increase. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, personnel expenses for the Global Wholesale Banking segment in the six months ended June 30, 2009 decreased 34% compared to R$306 million in the six months ended June 30, 2008, mainly due to cost synergies resulting from the merger of Santander Brasil and Banco Real.

Other General Administrative Expenses

Other general administrative expenses for the Global Wholesale Banking segment increased from R$49 million in the six months ended June 30, 2008 to R$96 million in the six months ended June 30, 2009, a 95% or R$47 million increase. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, other general administrative expenses for the Global Wholesale Banking segment in the six months ended June 30, 2009 decreased 9% compared to R$105 million in the six months ended June 30, 2008, mainly due to cost synergies resulting from the merger of Santander Brasil and Banco Real.

Impairment Losses on Financial Assets (Net)

Impairment losses on financial assets (net) for the Global Wholesale Banking segment in the six months ended June 30, 2009 with gains of R$2 million, a R$2 million increase from R$0.2 million in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, impairment losses on financial assets (net) for the Global Wholesale Banking segment in the six months ended June 30, 2008 were losses of R$10 million.

Provisions (Net)

Provisions (net) for the Global Wholesale Banking segment were gains of R$7 million in the six months ended June 30, 2009, compared to losses of R$48 million in the six months ended June 30, 2008 and on a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008. Provisions principally include provisions for labor and tax contingencies.

Asset Management and Insurance Segment Consolidated Results of Operations for the Six Months Ended June 30, 2009 Compared to the Six Months Ended June 30, 2008

Summary

Profit before income tax attributed to the Asset Management and Insurance segment in the six months ended June 30, 2009 was R$175 million, a 176% or R$112 million increase from R$63 million in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, profit before income tax attributed to the Asset Management and Insurance segment in the six months ended June 30, 2009 was unchanged compared to R$175 million for the six months ended June 30, 2008. Results of operations in our Asset Management and Insurance segment in the six months ended June 30, 2009 and 2008 do not include the

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results of operations of the asset management and insurance entities that were acquired on August 14, 2009. See “Summary—Recent Events” and “Business—Asset Management and Insurance”.

Net Interest Income

Net interest income for the Asset Management and Insurance segment in the six months ended June 30, 2009 was R$17 million, a 283% or R$12 million increase from R$4 million in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, net interest income for the Asset Management and Insurance segment in the six months ended June 30, 2009 decreased 50% compared to $33 million for the six months ended June 30, 2008. This decrease was mainly due to lower cash and short term investment volumes in 2009 compared to 2008.

Net Fee and Commission Income

Net fees and commission income for the Asset Management and Insurance segment in the six months ended June 30, 2009 were R$185 million, a 119% or R$100 million increase from R$84 million in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, net fees and commission income for the Asset Management and Insurance segment in the six months ended June 30, 2009 were unchanged compared to R$185 million in the six months ended June 30, 2008. The level of net fees and commission income was maintained, although increases in commissions on insurance sales were offset by decreases in investment fund fees.

Gains/(Losses) on Financial Assets and Liabilities

Gains (losses) on financial assets and liabilities (net) for the Asset Management and Insurance segment in the six months ended June 30, 2009 were gains of R$25 million, a 323% or R$19 million increase from R$6 million in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, gains/(losses) on financial assets and liabilities (net) for the Asset Management and Insurance segment in the six months ended June 30, 2009 increased R$19 million compared to R$6 million in the six months ended June 30, 2008.

Other Operating Income/(Expenses)

Other operating income (expenses) for the Asset Management and Insurance segment in the six months ended June 30, 2009 was income of R$232 thousand, a R$926 thousand increase compared to an expense of R$694 thousand in the six months ended June 30, 2008. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, other operating income for the Asset Management and Insurance segment in the six months ended June 30, 2009 increased R$1 million from expenses of $1 million for the six months ended June 30, 2008.

Personnel Expenses

Personnel expenses for the Asset Management and Insurance segment increased from R$16 million in the six months ended June 30, 2008 to R$25 million in the six months ended June 30, 2009, a 52% or R$9 million increase. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008, personnel expenses for the Asset Management and Insurance segment in the six months ended June 30, 2009 decreased 6% compared to R$27 million in the six months ended June 30, 2008, mainly due to cost synergies from the acquisition of Banco Real.

Other General Administrative Expenses

Other general administrative expenses for the Asset Management and Insurance segment increased from R$8 million in the six months ended June 30, 2008 to R$9 million in the six months ended June 30, 2009, a 16% or R$1 million increase. On a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008 decreased 36% compared to $14 million in the six months ended June 30, 2008, mainly due to cost synergies from the acquisition of Banco Real.

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Provisions (Net)

Provisions (net) for the Asset Management and Insurance segment were R$17 million in the six months ended June 30, 2009, compared to R$4 million in the six months ended June 30, 2008 or R$5 million on a pro forma basis as if the acquisition of Banco Real had occurred as of January 1, 2008. Provisions principally include provisions for labor and tax contingencies.

Results of Operations for the Year Ended December 31, 2008 Compared to the Year Ended December 31, 2007

As a consequence of our acquisition of Banco Real in August 2008, our results of operations for the years ended December 31, 2007 and 2008 are not comparable. In order to analyze the organic developments in our business, we discuss certain full-year 2008 financial information excluding the results of Banco Real as from January 1, 2008. For a complete presentation of this information, see “—Acquisition of Banco Real”.

	For the year ended December 31,
	2008 (excluding Banco Real)			2008			2007			% Change			% Change (excluding Banco Real)
	(in millions of R$)
Net interest income		6,671			11,438			6,195			84.6			7.7
Income from equity instruments		35			37			36			2.8			(2.8	)
Net fees and commissions		3,467			4,254			3,098			37.3			11.9
Share of results of entities accounted for using the equity method		6			112			6		n.m.				—
Gains/losses on financial assets and liabilities (net)		333			(1,287	)		1,517		n.m.				(78.0	)
Exchange differences (net)		300			1,476			382			286.4			(21.5	)
Other operating income (expenses)		(92	)		(59	)		133		n.m.				(169.2	)
Administrative expenses		(4,656	)		(7,185	)		(4,460	)		61.1			4.4
Depreciation and amortization		(656	)		(846	)		(580	)		31.4			13.1
Provisions (net)		(1,113	)		(1,230	)		(1,196	)		2.8			(6.9	)
Impairment losses on financial assets (net):		(2,864	)		(4,100	)		(2,160	)		89.9			32.6
Impairment losses on other assets (net)		(4	)		(77	)		(299	)		(74.2	)		(98.7	)
Gains/losses on disposal of assets not classified as non-current assets held for sale		6			7			1		n.m.				500
Gains/losses on disposal of non-current assets held for sale		25			9			14			(36	)		78.6
Profit before tax		1,458			2,549			2,687			(5.1	)		(45.7	)
Income tax		(217	)		(170	)		(784	)		(78.3	)		(72.3	)
Net income		1,241			2,379			1,903			25.0			(34.8	)

Summary

Net income for the year ended December 31, 2008 was R$2.4 billion, a 25% or R$476 million increase from R$1.9 billion in 2007. The 2008 increase was mainly due to the consolidation of the entities of Banco Real in our financial statements. Excluding the effect of the acquisition of Banco Real, net income for the year ended December 31, 2008 was R$1.2 billion, a 35% or R$662 million decrease from R$1.9 billion in 2007, mainly due to:

·	growth in credit volumes and a resulting increase in revenues from lending operations, driven by macro-economic growth in Brazil, although that growth has slowed beginning in the fourth quarter of 2008;

·	an increase in income from fees for services, partially offset by limits on banking fees for checking accounts and lending/leasing commissions imposed by the Central Bank starting in 2008;

·	a decline in earnings from trading and proprietary investment activities due to adverse market conditions;

·	an increase in credit impairment losses, particularly since the fourth quarter of 2008, driven by deteriorating economic conditions;

·	revenues of R$693 million from the sale of investment securities in 2007, compared to R$88 million in 2008.

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Net Interest Income

Santander Brasil’s net interest income was R$11.4 billion in 2008, an 85% or R$5.2 billion increase from R$6.2 billion in 2007. Excluding the effect of the acquisition of Banco Real, Santander Brasil’s net interest income was R$6.7 billion in 2008, an 8% or R$476 million increase from R$6.2 billion in 2007, mainly due to growth in our lending activities, offset in part by a decrease in the average spreads of our credit assets.

Average total earning assets were R$133.7 billion for the year ended December 31, 2008, a 54% or R$46.9 billion increase from $86.8 billion in 2007. Excluding the effect of the acquisition of Banco Real, average total earning assets were R$97.5 billion for the year ended December 31, 2008, a 12% or R$10.7 billion increase from R$86.8 billion in 2007. The principal drivers of this increase were loans and advances to credit institutions, the increase of which was funded with growth of time deposits in excess of commercial lending opportunities. In addition, retail and corporate lending increased, offset in part by a decline in consumer finance lending volumes. The increase in corporate lending was driven principally by increased trade finance and was concentrated in the Global Wholesale Banking segment. The increase in retail lending was driven principally by credit cards and overdrafts. The decline in consumer finance lending was principally due to declining volumes of auto financing, reflecting declining consumer confidence in the face of economic conditions, particularly in the fourth quarter of 2008.

The effect of this substantial growth in interest earning assets was offset in part by a 30 basis point decline in the spread of the average yield earned on our interest earning credit assets over the average cost of interbank funding. This spread is the way we evaluate the yield earned on our assets. The decline in this spread reflects the change in mix resulting from the movements described above, which led to a greater proportion of interest earning assets being comprised of relatively lower-yielding corporate loans. The effect of this decline in spread was exacerbated by increased cost of funds, driven by the rapid growth in time deposits , which increased as a proportion of total funding.

Average total interest bearing liabilities were R$109.4 billion for the year ended December 31, 2008, a 58% or R$40.2 billion increase from R$69.2 billion in 2007. Excluding the effect of the acquisition of Banco Real, average total interest bearing liabilities were R$80.4 billion for the year ended December 31, 2008, a 16% or R$11.2 billion increase from R$69.2 billion in 2007. The principal driver of this increase was time deposits, the average balance of which (excluding Banco Real) grew by 44% to R$35.1 billion. This growth resulted from a movement of customer funds out of mutual funds and other similar vehicles into lower-risk bank deposits as well as a “flight to quality” as Brazilian customers moved their savings to larger financial institutions.

Net Fees and Commission Income

Net fees and commission income was R$4.3 billion in 2008, a 37% or R$1.2 billion increase from R$3.1 billion in 2007. Excluding the effect of the acquisition of Banco Real, net fees and commission income was R$3.5 billion in 2008, a 12% or approximately R$369 million increase from R$3.1 billion in 2007, mainly due to a R$205 million increase in net commissions on the sale of insurance and a R$165 million increase net fees on overdrafts and a R$70 million increase in our trade finance business, offset in part by a R$157 million decline in other banking fees. The growth in insurance sales commissions reflects increased focus on this line of business by management. The decline in banking fees other than overdraft fees reflects restrictions on these fees imposed by our regulators during 2008.

The following table reflects the breakdown of net fee and commission income in 2008 and 2007, excluding Banco Real.

	For the year ended December 31,
	2008			2007			% Change
	(in millions of R$)
Banking fees		987			1,145			(13.8	)
Overdraft fees		498			333			49.5
Sale of insurance		652			447			45.9
Investment funds		523			515			1.6
Credit and debit cards		338			297			13.8
Capital markets		243			257			(5.4	)
Trade finance		176			106			66.0
Tax on services		(173	)		(154	)		12.3
Others		223			152			46.7
Total		3,467			3,098			11.9

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Share of Results of Entities Accounted for using the Equity Method

Share of results of entities accounted for using the equity method was R$112 million in 2008, a R$106 million increase from R$6 million in 2007. Excluding the effect of the acquisition of Banco Real, share of results of entities accounted for using the equity method was R$6 million in 2008, unchanged from 2007.

Gains (Losses) on Financial Assets and Liabilities (Net)

Gains/losses on financial assets and liabilities (net) changed to a loss of R$1.3 billion in 2008 from a gain of R$1.5 billion in 2007. Excluding the effect of the acquisition of Banco Real, gains/losses on financial assets and liabilities (net) was a gain of R$334 million in 2008, a 78% decrease from a gain of R$1.5 billion in 2007. This decline was largely driven by adverse market conditions and principally reflected the following results: a R$854 million decline in treasury results (market making, trading and short-term proprietary investing), a R$441 million decline in proceeds from the sale of long-term investments due to the non-recurrence in 2008 of gains realized upon the sale of part of our interests in BOVESPA and BM&F in 2007 and a R$650 million decline in other long-term positions associated with our balance sheet management. These declines were offset in part by a R$383 million increase in earnings on the provision of derivatives to customers, due to increased volumes in this line of business as demand grew for hedging products that allow customers to control their exposure to volatile markets.

Exchange Differences (Net)

Exchange differences (net) was R$1.5 billion in 2008, a 286% increase from R$382 million in 2007. Excluding the effect of the acquisition of Banco Real, exchange differences (net) was R$300 million in 2008, a 22% decrease from R$382 million in 2007. These gains were largely offset by losses on derivative transactions entered into to hedge our foreign currency exposure. Such losses are recorded under “Gains/losses on financial assets and liabilities”.

Other Operating Income (Expenses)

Other operating income (expenses) declined from income of R$133 million in 2007 to expense of R$60 million in 2008, or expense of R$92 million excluding Banco Real, principally reflecting the elimination in May 2008 of fees related to certain loans due to new regulations by the Central Bank.

Administrative Expenses

Administrative expenses increased from R$4.5 billion in 2007 to R$7.2 billion in 2008, or expense of R$4.7 billion excluding Banco Real, reflecting higher personnel expenses in line with historical trends of salary increases tied to inflation and increases in other general expenses.

Personal expenses

The following table sets forth personnel expenses for each of the periods indicated.

	Year Ended December 31,
	2008		2007
	(in millions of R$)
Wages and salaries		2,253		1,483
Social security costs		569		354
Additions to provisions for defined benefit pension plans		45		38
Contributions to defined contribution pension funds		33		4

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	Year Ended December 31,
	2008		2007
	(in millions of R$)
Share-based payment costs(1)		89		31
Benefits		423		294
Other personnel expenses		134		179
Total		3,548		2,384

(1)	Granted typically to members of our board of directors and to our executive directors and officers.

Other general expenses

Other general expenses increased from R$2.1 billion in 2007 to R$3.6 billion in 2008, or expense of R$2.3 billion excluding Banco Real, mainly due to expenses relating to expanding our credit card business and improving our information systems platform and the effects of inflation on our contracts with providers, many of which are indexed to inflation.

Provisions (Net)

Provisions (net) was R$1.2 billion in 2008, unchanged from R$1.2 billion in 2007. Excluding the effect of the acquisition of Banco Real, provisions (net) was R$1.1 billion in 2008. Provisions principally include provisions for labor and tax contingencies.

Impairment Losses on Financial Assets (Net)

Impairment losses on financial assets (net) was R$4.1 billion in 2008, a 86% or R$1.9 billion increase from R$2.2 billion in 2007. Excluding the effect of the acquisition of Banco Real, impairment losses (net) was R$2.9 billion in 2008, a 33% or R$705 million increase from 2007, reflecting deteriorating credit quality in nearly all our businesses (though primarily in small companies, individual lending and consumer finance products) as a result of worsening economic conditions in Brazil.

Non-performing assets were R$7.7 billion at December 31, 2008, a 267% increase from R$2.1 billion at December 31, 2007. Excluding the effect of the acquisition of Banco Real, non-performing assets were R$3.0 billion at December 31, 2008, a 43% increase from R$2.1 billion at December 31, 2007. Non-performing assets increased across all our businesses, although principally in retail banking and consumer finance. Deteriorating economic conditions resulted in an accelerated increase in non-performing assets in the third and fourth quarters of 2008. Non-performing assets grew by R$4.4 billion, or 204%, and R$1.1 billion, or 17%, in the third and fourth quarter, respectively. Excluding Banco Real, non-performing assets increased by R$424 million (20%) and R$438 million (17%) in those periods.

The following table shows the ratio of our impaired assets to total computable credit risk and our coverage ratio at December 31, 2008 and 2007.

	At December 31,
	2008			2007
	(in millions of R$, except percentages)

Computable credit risk(1)		164,695			64,558
Non-performing assets		7,730			2,093
Allowances for credit losses		8,181			2,249
Ratios
Non-performing assets to computable credit risk		4.7	%		3.2	%
Coverage ratio(2)		105.8	%		107.5	%

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(1)	Computable credit risk is the sum of the face amounts of loans and leases (including non-performing assets but excluding country risk loans), guarantees and documentary credits.

(2)	Allowances for credit losses as a percentage of non-performing assets.

Our coverage ratio at December 31, 2008 was 105.8% (after giving effect to the acquisition of Banco Real) and 102.8% (without giving effect to the acquisition of Banco Real) compared to 107.5% at December 31, 2007.

The following table shows our non-performing assets by type of loan at December 31, 2008 and 2007.

	At December 31,
	2008 (excluding Banco Real)		2008		2007
	(in millions of R$)

Impaired assets
Commercial, financial and industrial		770		2,730		502
Real estate – mortgage		20		74		23
Installment loans to individuals		2,221		4,528		1,558
Lease financing		12		398		10
Total		3,023		7,730		2,093

Commercial, financial and industrial

Non-performing assets in commercial, financial and industrial loans increased by R$2.2 billion from December 31, 2007 to December 31, 2008. Excluding the effect of the acquisition of Banco Real, non-performing assets in commercial, financial and industrial loans increased R$268 million in 2008, due primarily to higher rates of default by certain of our customers, primarily customers affected by the global financial market crisis, including real estate developers and certain export companies that were highly leveraged in foreign currency.

Real estate – mortgage

Non-performing assets in real estate – mortgage loans increased by R$41 million from December 31, 2007 to December 31, 2008. Excluding the effect of the acquisition of Banco Real, real estate – mortgage loans remained stable, with a slight decrease of R$3 million from December 31, 2007 to December 31, 2008.

Installment loans to individuals

Non-performing assets in installment loans to individuals increased by R$3.0 billion from December 31, 2007 to December 31, 2008. Excluding the effect of the acquisition of Banco Real, non-performing assets in installment loans to individuals increased by R$663 million. This increase was due primarily to the increase in unemployment during the last quarter of 2008 and in the first few months of 2009, which led to higher rates of default by individual borrowers.

Lease financing

Non-performing loans in lease financing increased by R$388 million from December 31, 2007 to December 31, 2008. Excluding the effect of the acquisition of Banco Real, non-performing loans in lease financing increased by R$2 million, due primarily to reclassification of certain amounts that were classified under a different line item in 2007 as “lease financing” in 2008. Management has sought to control losses related to non-performing loans in lease financing by implementing stricter credit approval policies, including lending only for newer vehicles and requiring higher collateral levels for new loan originations.

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Impairment Losses on Other Assets (Net)

Other impairment losses on other assets (net) was R$77 million in 2008, a 74% or R$221 million decrease from R$298 million in 2007. Excluding the effect of the acquisition of Banco Real, impairment losses (net) was R$4 million in 2008, a R$294 million decrease from 2007, mainly reflecting reduced impairment charges relating to goodwill and other intangible assets due to impairment charges taken in 2007 related to software for the Banespa information technology platform the use of which was discontinued when the platform was converted to the Santander platform.

Income Tax

Income tax was R$170 million in 2008, a 78% or R$614 million decrease from R$784 million in 2007. Excluding the effect of the acquisition of Banco Real, we had an income tax credit of R$217 million in 2008. Our effective tax rates, excluding Banco Real, in 2007 and 2008 were 29% and 15%, respectively. The decrease in effective tax rate reflected the impact of devaluation of the real on the net equity of our Cayman Island branch. The real declined in value against the dollar by 43% in the last four months of 2008, following our acquisition of this branch in connection with the Banco Real acquisition. The impact of this devaluation was a reduction of R$681 million of income tax expense. See “—Other Factors Affecting Financial Condition and Results of Operations—Cayman Offshore Hedging”. In addition, the effective tax rate was reduced by the use of available tax credits of R$125 million compared to R$27 million in 2007. At December 31, 2008, we had R$130 million of such tax credits remaining which have no expiration date.

Results of Operations by Segment for the Year Ended December 31, 2008 Compared to the Year Ended December 31, 2007

The following tables present an overview of certain income statement data for each of our operating segments for the years ended December 31, 2008 and 2007.

	For the year ended December 31, 2008
	Commercial Banking			% of Total			Global Wholesale Banking			% of Total		Asset Management and Insurance			% of Total		Total
	(thousands of R$, except percentages)
	(condensed income statement)
Net interest income		10,191,650			89.1			1,213,502			10.6		32,817			0.3		11,437,969
Share of results of entities accounted for using the equity method		112,330			100.0			—			—		—			—		112,330
Net fee and commission income		3,602,255			84.7			449,289			10.6		202,159			4.8		4,253,703
Gains/losses on financial assets and liabilities		(358,011	)		(188.8	)		540,636			285.0		7,041			3.7		189,666
Other operating income/(expenses)		(21,570	)		36.1			(37,782	)		63.2		(465	)		0.8		(59,817	)
Personnel expenses		(3,104,942	)		87.5			(403,671	)		11.4		(39,549	)		1.1		(3,548,162	)
Other administrative expenses		(3,485,160	)		95.8			(129,640	)		3.6		(21,975	)		0.6		(3,636,775	)
Impairment losses on financial assets (net)		(4,076,108	)		99.4			(23,176	)		0.6		—			—		(4,099,284	)
Provisions (net)		(1,160,918	)		94.4			(38,638	)		3.1		(30,761	)		2.5		(1,230,317	)
Impairment losses on non-financial assets (net)		(77,267	)		100.0			—			—		(10	)		—		(77,277	)
Profit (loss) before tax		877,525			34.4			1,526,455			59.9		144,853			5.7		2,548,833

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	For the year ended December 31, 2007
(Condensed) Income Statement	Commercial Banking			% of Total		Global Wholesale Banking			% of Total			Asset Management and Insurance			% of Total		Total
	(thousands of R$, except percentages)
	(condensed income statement)
Net interest income		5,491,818			88.6		693,259			11.2			10,209			0.2		6,195,286
Share of results of entities accounted for using the equity method		5,884			100.0		—			—			—			—		5,884
Net fee and commission income		2,694,428			87.0		253,022			8.2			150,522			4.9		3,097,972
Gains/losses on financial assets and liabilities		944,229			49.7		950,485			50.1			3,537			0.2		1,898,251
Other operating income/(expenses)		143,362			107.9		(10,412	)		(7.8	)		(26	)		—		132,924
Personnel expenses		(2,071,426	)		86.9		(277,737	)		11.6			(35,104	)		1.5		(2,384,267	)
Other administrative expenses		(1,963,009	)		94.6		(95,500	)		4.6			(17,441	)		0.8		(2,075,950	)
Impairment losses on financial assets (net)		(2,164,523	)		100.2		5,075			(0.2	)		11			—		(2,159,437	)
Provisions (net)		(1,192,553	)		99.7		7,654			(0.6	)		(11,513	)		1.0		(1,196,412	)
Impairment losses on non-financial assets (net)		(298,085	)		100.0		—			—			3			—		(298,082	)
Profit (loss) before tax		1,111,883			41.4		1,482,819			55.2			92,439			3.4		2,687,141

The following tables show our results of operations for the year ended December 31, 2008 for each of our operating segments, the amount contributed by Banco Real to each segment during the period, and the reported results of each segment including amounts contributed by Banco Real.

Commercial Banking	For the year ended December 31, 2008
	As reported less Banco Real			Banco Real			As reported
	(in thousands of R$)
Net interest income		5,602,063			4,589,587			10,191,650
Income from equity instruments		35,281			1,691			36,972
Share of results of entities accounted for using the equity method		6,062			106,268			112,330
Net fee and commission income		2,948,287			653,968			3,602,255
Gains/losses on financial assets and liabilities (net)		180,005			(538,016	)		(358,011	)
Other operating income (expenses)		(73,833	)		52,264			(21,570	)
Total income		8,697,865			4,865,762			13,563,627
Personnel expenses		(2,020,897	)		(1,084,046	)		(3,104,942	)
Other administrative expenses		(2,213,667	)		(1,271,494	)		(3,485,160	)
Depreciation and amortization of tangible and intangible assets		(622,602	)		(174,934	)		(797,536	)
Provisions (net)		(1,042,570	)		(118,347	)		(1,160,918	)
Impairment losses on financial assets (net):		(2,851,106	)		(1,225,002	)		(4,076,108	)
Impairment losses on other assets (net)		(4,384	)		(72,883	)		(77,267	)
Other non-financial gains (losses)		31,323			(15,493	)		15,830
Profit (loss) before tax		(26,037	)		903,562			877,525

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Global Wholesale Banking	For the year ended December 31, 2008
	As reported less Banco Real			Banco Real			As reported
	(in thousands of R$)
Net interest income		1,059,853			153,649			1,213,502
Income from equity instruments		—			—			—
Share of results of entities accounted for using the equity method		—			—			—
Net fee and commission income		345,303			103,986			449,289
Gains/losses on financial assets and liabilities (net)		445,100			95,536			540,636
Other operating income (expenses)		(16,864	)		(20,918	)		(37,782	)
Total income		1,833,392			332,253			2,165,645
Personnel expenses		(285,376	)		(118,295	)		(403,671	)
Other administrative expenses		(88,351	)		(41,288	)		(129,640	)
Depreciation and amortization of tangible and intangible assets		(29,342	)		(14,723	)		(44,065	)
Provisions (net)		(40,634	)		1,996			(38,638	)
Impairment losses on financial assets (net):		(13,034	)		(10,142	)		(23,176	)
Impairment losses on other assets (net)		—			—			—
Other non-financial gains (losses)		—			—			—
Profit (loss) before tax		1,376,655			149,800			1,526,455

Asset Management and Insurance	For the year ended December 31, 2008
	As reported less Banco Real			Banco Real			As reported
	(in thousands of R$)
Net interest income		9,193			23,624			32,817
Income from equity instruments		—			—			—
Share of results of entities accounted for using the equity method		—			—			—
Net fee and commission income		173,014			29,145			202,159
Gains/losses on financial assets and liabilities (net)		7,041			—			7,041
Other operating income (expenses)		(540	)		74			(465	)
Total income		188,708			52,843			241,551
Personnel expenses		(32,667	)		(6,882	)		(39,549	)
Other administrative expenses		(14,682	)		(7,293	)		(21,975	)
Depreciation and amortization of tangible and intangible assets		(4,404	)		—			(4,404	)
Provisions (net)		(30,046	)		(716	)		(30,761	)
Impairment losses on financial assets (net):		—			—			—
Impairment losses on other assets (net)		—			(10	)		(10	)
Other non-financial gains (losses)		—			—			—
Profit (loss) before tax		106,910			37,943			144,853

Commercial Banking Segment Consolidated Results of Operations for the Year Ended December 31, 2008 Compared to the Year Ended December 31, 2007

Summary

Profit before income tax attributed to the Commercial Banking segment for the year ended December 31, 2008 was R$877 million, a R$235 million decrease from R$1,112 million in 2007. Excluding the effect of the acquisition of Banco Real, profit before income tax attributed to the Commercial Banking segment for the year ended December 31, 2008 was a loss of R$26 million, a R$1,138 million decrease from R$1,112 million in 2007.

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Net Interest Income

Net interest income for the Commercial Banking segment was R$10.2 billion in 2008, a 86% or R$4.7 billion increase from R$5.5 billion in 2007. Excluding the effect of the acquisition of Banco Real, net interest income for the Commercial Banking segment was R$5.6 billion in 2008, a 2% or R$0.1 billion increase from R$5.5 billion in 2007, mainly due to growth in our lending activities, offset in part by a decrease in the average spread of our credit assets as the proportion of lending to individuals in the mix declined, and increasing market rates of interest, which were reflected in the new time deposits during the period.

Share of Results of Entities Accounted for using the Equity Method

Share of results of entities accounted for using the equity method for the Commercial Banking segment was R$112 million in 2008, a R$106 million increase from R$6 million in 2007. Excluding the effect of the acquisition of Banco Real, share of results of entities accounted for using the equity method for the Commercial Banking segment was R$6 million, unchanged from 2007.

Net Fee and Commission Income

Net fee and commission income for the Commercial Banking segment was R$3.6 billion in 2008, a 34% or R$908 million increase from R$2.7 billion in 2007. Excluding the effect of the acquisition of Banco Real, net fee and commission income for the Commercial Banking segment was R$2.9 billion in 2008, a 9% or R$250 million increase from R$2.7 billion in 2007, mainly due to increased commissions on the sale of insurance by our retail banking branches, offset in part by the effect of new restrictions on other banking fees.

Gains/(Losses) on Financial Assets and Liabilities

Gains/(losses) on financial assets and liabilities for the Commercial Banking segment amounted to a loss of R$358 million in 2008, a R$1.3 billion decrease from a gain of R$944 million in 2007. Excluding the effect of the acquisition of Banco Real, gains/(losses) on financial assets and liabilities for the Commercial Banking segment were R$180 million in 2008, a R$764 million decrease from R$944 million in 2007, mainly due to higher revenues from non-recurring items in 2007 compared to 2008, primarily our sale of investment securities in BM&F and BOVESPA. Losses in Banco Real were principally due to a hedge related to our Cayman Island branch investment, the results of which are largely offset by reduced income taxes. See “—Other Factors Affecting Financial Condition and Results of Operations—Cayman Offshore Hedging”.

Other Operating Income/(Expenses)

Other operating income/(expenses) for the Commercial Banking segment amounted to an expense of R$21 million in 2008, a R$165 million decrease from a gain of R$143 million in 2007. Excluding the effect of the acquisition of Banco Real, other operating income/(expenses) for the Commercial Banking segment amounted to an expense of R$74 million 2008, a R$ 217 million decrease from a gain of R$143 million in 2007, mainly reflecting the elimination in May 2008 of fees related to certain loans due to new regulations by the Central Bank.

Personnel Expenses

Personnel expenses for the Commercial Banking segment increased from R$2.1 billion in 2007 to R$3.1 billion in 2008, a 48% or R$1 billion increase. Excluding the effect of the acquisition of Banco Real, personnel expenses for the Commercial Banking segment were R$2.0 billion, a 2% or R$50 million decrease from R$2.1 billion in 2007, mainly due to the streamlining of our operations in anticipation of obtaining cost synergies from the acquisition of Banco Real.

Other General Administrative Expenses

Other general administrative expenses for the Commercial Banking segment increased from R$2 billion in 2007 to R$3.5 billion in 2008, a 78% or R$1.5 billion increase. Excluding the effect of the acquisition of Banco Real, other general administrative expenses for the Commercial Banking segment were R$2.2 billion, a 13% or R$250 million increase from R$2 billion in 2007, mainly due to expenses relating to expanding our credit card business and improving our information systems platform and the effects of inflation on our contracts with providers, many of which are indexed to inflation.

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Impairment Losses on Financial Assets (Net)

Impairment losses on financial assets (net) for the Commercial Banking segment was R$4.1 billion in 2008, a 90% or R$1.9 billion increase from R$2.2 billion in 2007. Excluding the effect of the acquisition of Banco Real, impairment losses (net) for the Commercial Banking segment was R$2.9 billion in 2008, a 33% or R$705 million increase from 2007, reflecting deteriorating credit quality in nearly all areas of our Commercial Banking segment (though primarily in small companies, individual lending and consumer finance products) as a result of worsening economic conditions in Brazil.

Provisions (Net)

Provisions (net) for the Commercial Banking segment was R$1.2 billion in 2008, unchanged from R$1.2 billion in 2007. Excluding the effect of the acquisition of Banco Real, provisions (net) for the Commercial Banking segment was R$1.0 billion in 2008. Provisions principally include provisions for labor and tax contingencies.

Impairment Losses on Non-Financial Assets (Net)

Other impairment losses on other assets (net) for the Commercial Banking segment was R$77 million in 2008, a 74% or R$221 million decrease from R$298 million in 2007. Excluding the effect of the acquisition of Banco Real, impairment losses (net) for the Commercial Banking segment was R$4 million in 2008, a R$294 million decrease from 2007, mainly reflecting reduced impairment charges relating to intangible assets due to impairment charges taken in 2007 related to software for the Banespa information technology platform the use of which was discontinued when the information technology system was converted to the Santander platform.

Global Wholesale Banking Consolidated Results of Operations for the Year Ended December 31, 2008 Compared to the Year Ended December 31, 2007

Summary

Profit before income tax attributed to the Global Wholesale Banking segment for the year ended December 31, 2008 was R$1,526 million, a R$43 million increase from R$1,483 million in 2007. Excluding the effect of the acquisition of Banco Real, profit before income tax attributed to the Global Wholesale Banking segment for the year ended December 31, 2008 was R$1,377 million, a 7% or R$106 million decrease from R$1,483 million in 2007.

Net Interest Income

Net interest income for the Global Wholesale Banking segment was R$1.2 billion in 2008, a 75% or R$520 million increase from R$693 million in 2007. Excluding the effect of the acquisition of Banco Real, net interest income for the Global Wholesale Banking segment was R$1,060 million in 2008, a 53% or R$367 million increase from R$693 million in 2007, reflecting growth in the credit portfolios of our GB&M customers and increased in net interest income from our treasury business.

Net Fee and Commission Income

Net fee and commission income for the Global Wholesale Banking segment was R$449 million in 2008, a 78% or R$196 million increase from R$253 million in 2007. Excluding the effect of the acquisition of Banco Real, net fee and commission income for the Global Wholesale Banking segment was R$345 million in 2008, a 36% or R$92 million increase from R$253 million in 2007, mainly due to an increase in net commissions for foreign trading operations resulting from a higher volume of transactions in 2008 compared to 2007 and higher fee commissions from guarantees and brokerage businesses.

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Gains/(Losses) on Financial Assets and Liabilities

Gains on financial assets and liabilities for the Global Wholesale Banking segment were R$541 million in 2008, a 43% or R$410 million decrease from R$951 million in 2007. Excluding the effect of the acquisition of Banco Real, gains/(losses) on financial assets and liabilities for the Global Wholesale Banking segment were R$ 445 million in 2008, a 53% or R$505 million decrease from R$951 million in 2007, mainly due to decrease in gains on financial assets and liabilities in our treasury business.

Other Operating Income/(Expenses)

Other operating expenses for the Global Wholesale Banking sector were expenses of R$38 million in 2008, a 263% or R$28 million increase from expenses of R$10 million in 2007. Excluding the effect of the acquisition of Banco Real, other operating income/(expenses) for the Global Wholesale Banking segment amounted to expenses of R$17 million in 2008, a 62% or R$7 million increase from expenses of R$10 million in 2007, mainly due to higher expenses for deposit insurance as a result of increases in time deposits.

Personnel Expenses

Personnel expenses for the Global Wholesale Banking segment increased from R$278 million in 2007 to R$404 million in 2008, a 45% or R$126 million increase. Excluding the effect of the acquisition of Banco Real, personnel expenses for the Global Wholesale Banking segment were R$285 million in 2008, a 3% or R$7 million increase from R$278 million in 2007, reflecting higher costs in line with annual salary increases tied to inflation.

Other General Administrative Expenses

Other general administrative expenses for the Global Wholesale Banking segment increased from R$96 million in 2007 to R$130 million in 2008, a 36% or R$34 million increase. Excluding the effect of the acquisition of Banco Real, other general administrative expenses for the Global Wholesale Banking segment were R$88 million in 2008, a 7% or R$7 million decrease from R$96 million in 2007, reflecting our cost control targets.

Impairment Losses on Financial Assets (Net)

Impairment losses on financial assets (net) for the Global Wholesale Banking segment were R$23 million in 2008, compared to a gain of R$5 million in 2007. Excluding the effect of the acquisition of Banco Real, impairment losses on financial assets (net) for the Global Wholesale Banking segment were R$13 million in 2008, compared to a gain of R$5 million in 2007, mainly due to increased delinquency by our wholesale customers as a result of the global financial crisis.

Provisions (Net)

Provisions (net) for the Global Wholesale Banking segment were R$39 million in 2008, compared to a gain of R$8 million in 2007. Excluding the effect of the acquisition of Banco Real, provisions (net) for the Global Wholesale Banking segment were R$41 million in 2008, compared to a gain R$8 million in 2007.

Asset Management and Insurance Segment Consolidated Results of Operations for the Year Ended December 31, 2008 Compared to the Year Ended December 31, 2007

Summary

Profit before income tax attributed to the Asset Management and Insurance segment for the year ended December 31, 2008 was R$145 million, a R$53 million increase from R$92 million in 2007. Excluding the effect of the acquisition of Banco Real, profit before income tax attributed to the Asset Management and Insurance segment for the year ended December 31, 2008 was R$107 million, a 16% or R$15 million increase from R$92 million in 2007. Results of operations in our Asset Management and Insurance segment in 2008 and 2007 do not include the results of operations of the asset management and insurance entities that were acquired on August 14, 2009. See “Summary—Recent Events” and “Business—Asset Management and Insurance”.

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Net Interest Income

Net interest income for the Asset Management and Insurance segment was R$33 million in 2008, a 221% or R$23 million increase from R$10 million in 2007. Excluding the effect of the acquisition of Banco Real, net interest income for the Asset Management and Insurance segment was R$9 million in 2008, a 10% or R$1 million decrease from R$10 million in 2007. The decrease was due primarily to lower cash volumes in 2008 compared to 2007.

Net Fee and Commission Income

Net fee and commission income for the Asset Management and Insurance segment was R$202 million in 2008, a 34% or R$52 million increase from R$151 million in 2007. Excluding the effect of the acquisition of Banco Real, net fee and commission income for the Asset Management and Insurance segment was R$173 million in 2008, a 15% or R$23 million increase from R$151 million in 2007, mainly due to an increase in net commissions on the sale of insurance.